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Why don't you need to budget

Jordan Wathen, columnist for Motley Fool, offers a unique perspective on managing personal finances.

Give up budgeting for 2018 and do something else. It is a waste of time.

Budgeting is a great way to know where your money goes and where it ends. Budgeting is time-consuming, distracting, and costly.

A budget is a plan that is idealistic. This is it. This budget is not recommended for saving money for the future, paying down debt, or putting cash in your savings account. Budgeting is basically about putting in writing your intentions to spend money in a specific way with the goal of saving money.

Budgets that address the problem incorrectly are most likely to fail. Saving first is a better option. This will allow you to adjust your spending to meet your savings goals.

Savings are the only thing that matters.

Personal finances can be reduced to a simple equation. Financial success is determined by the difference between your earnings and your expenses. Your financial success will be determined by the amount of difference you make between your earnings, and your expenses.

I don’t budget. I keep track of my expenses. But it works because my priorities are clear. It is important that a certain percentage of my earnings automatically transfer to my savings account. This happens without me even having to think about it. Automation allows me to think about how I will spend the money instead of worrying about how to save it.

This task can be automated easily. There are three ways to accomplish this task.

  1. Contributions to your pension account should be increased. This is my preferred option. Although I cannot predict the future behavior of stocks over the next 10 to 30 years, I know that those who save 15% or more of their income will have half the money or more than those who save only 10%. It is easy to set up.
  2. Open a second bank account. Set up automatic transfers from the main account. This is a great way of building a financial cushion in times of need. This second account is not necessary until you are ready to buy a house or other major purchases. If you do have any problems, your “safety cushion” will be there.
  3. For the next 12 month, set up automatic payments to your loans. It is possible to do this with many online banks. Saving money is possible by paying more than the minimum on a loan. This is a great way to save money as you are investing your money in something and not on other things.

Do not make a budget. Instead, set a savings goal for 2018 in absolute numbers or percentages and automate it. Make saving a priority. Your expenses should match your savings.

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