So, do you really need a budget?

The debate around whether or not you really need to budget waxes and wanes in the personal finance community. Some claim not to need a budget at all, some use a “bucket” system, others track their spending only, and some go all in.

For the past two years I’ve been blogging, I’ve been “all in” with a full, proper budget. Regular readers will have noticed that I have not yet posted any results for July, though. Unfortunately I’ve been without my desktop computer for the past couple of weeks due to a dead graphics card, and the replacement I bought is not working either, so until I can get the computer place to sort it out for me, all my internet interaction is happening via tablet and phone. Neither of these devices is conducive to viewing ginormous spreadsheets, so instead I thought I’d write about something I’ve noticed in my own behaviour and psychology around the whole budgeting thing.

Before the graphics card shuffled off it’s electronic mortal coil I was working on setting up my budget for the 2021-2022 financial year, and I was looking at all my regular costs and having a quick squiz at comparing some of the annual amounts spent during 2020-2021 on some of the categories to the previous year. That was rather revealing, especially as I had been challenging myself in 2020-2021 to reduce my discretionary spending. Sadly, it seems I wasn’t overly successful given that I actually spent more in some areas than I had previously. That said, I haven’t drilled down to the nitty-gritty of whether prices have gone up, so it’s hard to say definitively that the higher spend was just down to my habits, but in all honesty I think it’s more likely than not that it was. 😀

So, do you really need a budget? Well, some may not but it seems pretty clear to me that I do. Or at least I need to track my spending. During July I loosened the reins a bit and didn’t focus all that closely on my spending. July is my birthday month so relaxing my grip is something I usually do during that month. Hey, a girl has to have some fun, right? I went away for a short trip as well, so I was doing more eating out and tripping around. I went out to Warwick for the Jumpers and Jazz in July festival, which I hadn’t been to before but an old school friend told me it was really good. I was booked to go last year but COVID happened and, like pretty much every other event planned for 2020, it got cancelled.

However, we’re now just over half way through August and I’ve noticed that I haven’t tightened the reins again yet, and I think this has a lot to do with my not having managed to get my next budget in place for the start of the new financial year. Old habits can re-assert themselves so easily and quickly! For me, the discipline that having a budget imposes on my thinking helps to counteract my habits – I need a goal, otherwise it’s easy for me to just cruise along. But where did these spending habits come from in the first place? I’ve been thinking about this too.

When I was a small child (all the way back in the 70s) my parents – particularly my mum – were very spending conscious. You know that money is an issue in your household when you ask your mum if you can have a recorder because your classroom teacher has offered to teach you and a couple of classmates how to play, and the first thing she asks you is “how much will it cost?”

Now, I have no idea how much it cost to buy a basic plastic recorder in the early 1970s, but they’re around $10 to $14 today so I imagine they wouldn’t have been more than a couple of dollars back then. Anyway, it must have been cheap enough because I got that recorder – and thus began a lifelong love of music and performing. I still own that recorder, by the way. 🙂

So, money was clearly a big consideration in my household. One defining feature of my childhood was moving around a lot as my dad chased better jobs with higher pay. From memory the longest we lived in one place was four years, with it being more usual to be somewhere for two at the most before moving on. (When we came to Brisbane I was quite surprised to realise at the end of high school that it was the longest I’d lived in one city in my whole life.) I don’t remember ever feeling as though we were poor as such, but there was always this underlying current of financial concern at home. The couple of years we spent living in Papua New Guinea was probably the most wealthy time in my family’s life – we got to have a holiday overseas for the first time ever!

A short time after coming to Brisbane, my parents started a restaurant business with another couple (I was fourteen) and I worked there every weekend from when it first opened to when I started my first real job after finishing school. When I look back at that now, I wonder how much money I earned during that time. I always spent my money – mostly on books and records and outings with friends, only occasionally saving for something in particular. I think that this was a reaction against the general penny-pinching of my early childhood – it’s really surprising how deeply ingrained these early experiences become, even though you’re not consciously aware of what they’re teaching you. Having my own money that I could spend as I liked was quite the dopamine hit to my brain, which I now suspect turned me towards being a spender rather than a saver. Investing was not something I was even vaguely aware existed until a couple of years after I left school. After my first ill-fated foray into the stock market – I bought a small parcel of shares and lost it only a few months later in the 1987 stock market crash – I was scared away from investing for quite literally decades. In fact, I didn’t go near the stock market again for almost 30 years.

Even once I was working in a real job, I still wasn’t saving much, if at all. I never really gave it much thought back then. I had a stable and permanent job with a reasonable rate of pay – enough that I could buy a small block of land in my mid-twenties and build a house on it a couple of years later without sacrificing much in the way of lifestyle. But along with pay rises over the years came the spending creep. It just never occurred to me to save any extra money I earned. Yet I’d seen a financial advisor when I was twenty-one, but all that I got out of that really was income protection insurance – I don’t remember any focus on investing coming through in that consultation.

Maybe this is just down to being young and not really being interested in what the distant future might hold or maybe assuming that I would meet a nice bloke and get married so things would be better with two incomes (well, that just never happened), but I now think that all that moving around to chase a better life laid the groundwork for an underlying belief that this was just how most people lived and got ahead. I didn’t know anyone who was wealthy so, although I knew that rich people existed, I had no idea what that life would look like. I certainly would never have believed back then that it could be possible for me to be better off financially, nor would I have had the slightest clue how to go about improving my financial situation other than doing exactly what I’d seen as a child – chase the better paying jobs. Which is what I did.

Anyway, better late than never, as they say. Although I’m a late starter, taking active control of my finances instead of just drifting along has been life-changing for me. But old habits die hard partly because our money stories are very powerful, so I’ll continue to use a budget – even if it’s just a basic bucket system – because it works for me. (I’m considering signing up to YNAB or something similar because setting up the annual spreadsheet is a pain!)

Speaking of money stories, one good thing I recently noticed is that my niece is starting to take an interest even though she’s still studying and a single parent to boot, so I’m happy that her mum (who is also intensely focused on improving her finances) and I are providing examples that run counter to our own childhood lessons. We had a good chat a couple of weeks ago about superannuation and retirement, so I’m hoping that our focus on doing better in the financial arena will encourage her to do the same once she’s working because, after all, we all want our kids (or our siblings’ kids) to have it better than we did.