Why You Don't Need a Budget
Manage your spending by creating and sticking to a budget.
-Alexa Von Tobel
Traditional Budgets Don't Work
You know you need to save more, but how? Where will the money come from? It takes tremendous effort to accurately record all transactions so that you have a valid budget. Then, frequently, after
A much easier way to figure out your spending is to take a twelve-month period and look at your cash and credit card balances at the beginning and compare them to the end of the year. Look for any inflows from gifts or other non-salary items, and then measure the change. Did the cash accounts go up or did the credit cards go up? That is your savings/dis-savings for that year.
Rather than doing a budget to adjust behavior, force a change. You can do that by removing money from your discretionary spending by contributing the maximum to a 401(k) plan, by an auto debit that put funds into an investment account, and other auto payments you remove available cash from the equation. If your credit card balances go up, then you have to make a decision to alter behavior.
How does cash flow relate to debts?
Managing your debt means getting the lowest after-tax interest rate so that you pay as much principle with each payment to pay off the loan as quickly as possible.
You can deduct the interest paid on a mortgage and an equity line of credit debt. You can deduct up to $2,500 of student loan debt. But you cannot deduct the interest on most other forms of debt.
Yes, you can skip the budget, but don't skip knowing where all your money goes so that you can save! Remember, every dollar has a job.