Something that comes up a lot is this idea that you can budget in your head.
The “budgeter” says they know about how much they have in the bank and they are pretty sure they know how much all their bills are. They use this to “budget” their money – which really means they assume they have enough in the bank to cover whatever they’re doing.
There is no plan, no goal, only assumptions.
If this offends you, I’m sorry, but if your budget is in your head then you aren’t budgeting. Instead, you are fooling yourself into thinking you know how to handle money when you really don’t or don’t care to.
I’ve been there. I’ve lived that life and been that fool. Those “budgets” aren’t helping you do anything except lie to yourself.
Why It Doesn’t Work
Budgeting in your head is doomed from the start. There are several reasons for this; I’ll highlight a few:
- The total is unknown. When budgeting in your head, you don’t know how much you have when the month begins or how much you’ve made. Even if you’re paid on salary you aren’t going to remember the exact dollar amount added to your account. This starts you out at a disadvantage when trying to figure out how much you should have.
- The categories are jumbled. This kind of budgeting jumbles all the categories. Instead of answering the question, “how much did I spend eating out” your budget asks the question, “did I eat out too often”. Do you see the difference? One has a number behind it, the other a feeling. There are areas in this budget you can’t account for without keeping a record of what you spend.
- Bills are unknown. If you don’t have them written out, you will forget how much your bills are. Sure, you have a pretty good idea of how much each bill is, but what about gas, food, and utilities? These bills change every month and if you don’t plan your spending you won’t know how much you really have in the bank once they’ve been paid.
- Money happens to you. The worst thing about budgeting in your head is that money happens to you every month, instead of a real budget where you happen to your money. What’s most insidious about this is it makes you feel like you’re in control when you’ve really lost all control of your money and spending habits.
What To Do
What should you do if you’re budget is stuck in your head? How to get over ignoring your responsibilities with money? I’ll tell you on Thursday.
Until then, I have a question for you:
How do you budget?