“Do I REALLY need to budget my money?” 

I get this question quite often, and it’s a really interesting question. As a financial planner, you might assume that my answer would be “yes” immediately. But I have the advantage of seeing perspectives and lifestyles from all different financial situations, so I actually have a different answer to this question. 

My answer is… maybe. There are actually 3 different camps that people fall into financially speaking, and each type of person has a different focus they should be looking at when they sit down to do their budgeting.

The Three Types of Budgeters


1) Money is tight

Oh, I’ve been here. There was a time in my life when I knew exactly how much money was in my account at all times, and I knew precisely how every transaction would impact me. My accounts would often go under $100. I was barely making ends meet. 

If you’re in this space, budgeting is critically important. You need to be extremely conscientious of how you’re managing your money on a daily, weekly, and monthly basis because the consequences of not doing so are extreme. 

Not paying attention to a budget is how people rack up credit card debt and spend thousands of dollars that they DON’T have. If you’re in this situation, it’s imperative that you budget and pay close attention to your finances so that you don’t rack up credit card debt. 

Because as we all know, credit card debt is the cancer of your financial situation and is extraordinarily difficult, if not impossible, to get out of.


2) There’s a monetary buffer

This is for the folks who aren’t living paycheck to paycheck but aren’t “rolling in it” just yet. You have a little bit of a buffer every month and aren’t necessarily counting your money down to the penny. 

One time, I was speaking with a client who was at this stage in his life. He said to me, “I don’t understand the need for a budget because we have this rhythm of spending every single month. Sometimes we go a little higher, sometimes a little lower, but it stays fairly balanced and we know where our money is every month.” 

I thought this was a brilliant way of explaining it. There are times in life when you have enough. When your income outpaces your expenses and you’re able to spend as you want without being crazy and still have excess money to save. 

So, does this group need a budget? Not necessarily. But a budget can help you reach your larger goals, like a new car or a vacation. At this point, a budget is more about prioritizing than saving on everyday expenses. What is most important to you in this moment? Spending as you wish for convenience, or saving for a larger expense? If you’re in this middle category, it’s important to simply be aware of the convenience of not having to budget every single dollar, versus the comfort of not getting your larger goals. 

Something to be careful of, though, is that many people in this group might not have a clear picture of where they are at in terms of their financial future. Be mindful of whether you’re putting a plan in place for things like retirement, unexpected medical expenses, and other things. 


3) More money is coming in than going out

Now, your first thought might be that anyone in this category is wealthy or rich. But I’ve found that’s not the case. I have clients who are living solely off of Social Security payments and yet their monthly income is much greater than their expenses. 

Many of these people don’t need to be doing a forward-looking budget. Of course, this is an extremely fortunate position to be in. But you know what?

Most of the people in this category were strict budgeters in the past

When you’re in this camp of people, it’s important to remain conscientious of your spending habits. But do you need a budget? Probably not. 


What Should You Do Even if You Don’t Need to Budget?

So, now that we know when you do or don’t need to budget, let’s talk about a few of the traits and habits everyone should pick up — no matter where you are financially.

Know how much is enough

I don’t mean simply for the life you’re living right now. I mean for the life you want to live. Maybe you are living life as you always dreamed, and you have enough money. Or maybe you wish you had more. Either way, you should always know your baseline number to cover your expenses and the lifestyle you desire. 

Knowing this exact number is critical to your financial success and happiness. If you don’t know this number… you won’t be happy. You’ll always be chasing for something more. 

This becomes even more important when you have a partner. I’ve worked with couples before who seemed like they were on different pages, but the reality was that they simple didn’t know what their dream life looked like financially. 

Remember, this number is going to change over time, so it’s great to consistently revisit this number!


Have awareness

Be very aware of where your money is going and how you’re spending it. This goes for you whether you’re on a strict budget or a loose one. I’ve seen clients from many different financial lifestyles overspend their incomes and get themselves into credit card debt. 

You might be in a category where you think you’re totally fine, but you’re actually spending way more money than you want to. Awareness is a key piece in the 80/20 rule. If you become aware of your money and spending habits, you’ll already be doing 80% of the work! 

I do want to point out that there might be times in life where having a budget just isn’t possible. Life can get really hard, really crazy, and really expensive. And sometimes simply surviving in these moments… is winning. 


Resources Mentioned in This Episode

Thank you so much for checking out this episode of Everyday Money with Hannah Moore. I look forward to talking more with you about how you can prepare your financial picture for any number of events/purchases. 

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Resources mentioned:

  • Use our BudgetingBlocks™ to plan a financial future that includes the highs and lows of the market. A good budget includes all possible financial scenarios and helps you see where your money is going!