Singletary: Five reasons you need a budget

I’ll give you five reasons why you need a spending plan.

• It’s not just about your income and expenses. I’ve met and counseled countless individuals and couples with six-figure salaries who lost track of their spending because they had so much money coming into their household that they didn’t think a budget mattered. They ended up spending themselves into a hot mess. They had enough money coming in to cover the basics, but they weren’t on track with their retirement savings. The college funds they had for their children were woefully underfunded. Even with good income, they lived beyond their means by overusing credit cards.

• The numbers don’t lie. “We’re not extravagant,” the reader wrote. This could be true. Or not.

When you aren’t closely watching, it’s very possible you’re overspending and don’t know it. Small expenditures often don’t register. In your mind, they also don’t add up to big money, because you aren’t keeping track of the totality of your spending in a particular category.

• It’s a stopgap tool. How do you know if you’re spending more than you want in any one category if you don’t have a figure to measure it against? People tell me all the time that they don’t eat out much or that they don’t really spend a lot shopping. Let’s see if that’s true for you, too.

Set a limit in your budget for those expenses and then doublecheck it against your monthly bank statement. When I have folks do this over several months, it often turns out they’ve been lying to themselves.

For some useful family-budget templates you can download for free, go to Vertex42.com.

• It puts short-term and long-term goals in perspective. The reader wrote: “When we have some extra money sitting in our bank account, we put it in the kids’ college funds or send it to the mortgage.” This might be the best use of the money, but it might not.

• You can have the things you want. A budget doesn’t only have to be about setting limits on what you can’t do or have. Turn that thinking around. It can also show you what you can do. So, in the case of this couple, they probably could afford to save for a summer vacation to France.

Budgeting isn’t just numbers on a paper. It’s not just about keeping down your expenses in such categories as eating out. It’s a way to drive your spending in a direction that helps you live the financial values I hope you’ve set for yourself.