Are you really heading in the direction you think you are?

1249981_bananaThings have been tight lately. The other day I went to the store knowing I only had $17 left for the week. Milk, grapes, cat food and two bananas later, the checkout operator’s telling me the total is $19.

Um, better make that one banana.

Yeah, nanas are expensive at the moment. And it’s still raining.

Anyway, if you were to ask me that day how our finances were going I would have replied in the negative. They suck. We’re stuck in the mire, or worse, moving backwards.

But how accurate are our gut feelings?

I have written in the past about how I’m a fan of real data, metrics, numbers, aka budgeting. I wouldn’t have believed it if someone told me years ago that I would say this, but here it goes: there’s a beauty and a little thrill in numerical data.

So what does our budget tell us?

It turns out, despite our perception that things are going poorly, we’re actually up for the year. The last of our credit card debt from our new hot water system is paid off, our mortgage is lower than the start of the year, our savings have increased by $50 (better than decreased at least), our investment has increased ever so slightly and we continue to contribute a few dollars to it every month.

The actual numbers tell a different story to our feelings. And we’re heading in the other direction than we thought we were.

Of course, it could have been the other way round. Things could have been worse than what we thought. But knowing that now and taking steps to rectify the situation is better than going forth blindly and not knowing until our situation became drastic. And of course, we can use our budget to single out areas to cut back.

There are a lot of personal finance writers who claim that you don’t need to keep a budget. Budgeting is unpopular and I think some writers tell people what they want to hear. I disagree, especially if money is tight, or if you have specific savings goals. Budgeting or understanding what you do with your money is important. It is empowering, it is encouraging and in some cases, relieving (I was relieved at least). Budgeting to me isn’t about writing down a few numbers and trying in vain to stick to an artificial system. Life doesn’t work like that. A budget is a tool to manage your money, and it comes in all sorts of shapes and sizes.

I prefer an excel spreadsheet, but you don’t need excel to keep a budget. You can write it down, you can automate it, you can use the old envelope system. The important thing is using a system that helps you understand your money, what position you’re in financially, and whether you’re heading towards achieving your financial goals. It is a tool that has to work for you.

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  1. Delphine says

    Congratulations, you are doing well. I agree budgeting is mind settling. I use to keep a cash book when my children were young. Every page was an account and a certain amount of money went into to it every payday e.g. school shoes, car insurance and repair, birthdays etc. etc. So X amount of dollars stayed in the bank but I had it divided into small categories and when I bought the kids shoes I knew how much I had for them. It gave me great peace of mind. There were and still are major things that throw a spanner in the works but that’s life. You’re doing great.

  2. Felicity says

    I know this post ain’t about the bananas but l just wanted to add that l haven’t eaten a banana for a good couple of months or close to it because of the quality and cost. But having said that pears have been cheap – averages around 50cents per pear, so l’ve given up on bananas at the moment. I think budgets are essential for families. Melissa you are in front – your budget is working. Well Done!

  3. says

    Thanks Delphine! Our budget started out just like yours in an exercise book.

    Felicity, I know, bananas are such a treat these days! But last time nanas were expensive (Larry) I remember someone telling me that people often ‘treat’ themselves to an icecream or mars bar for a couple of dollars without even thinking about it, so why buy a banana instead. I always think of that when I buy expensive bananas – better than a mars bar. Not that we really buy mars bars though.