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Cutting a BudgetThe name of this website is Repaid.org. Understandably, you would think that you would find post after post about repaying your debts and tips on how to become a shining beacon within the realm of personal finance. Instead, you find story after story about budgeting. Why? The best way to find the money to repay your debts is to have a sound budget in hand.

Within the arena of budgeting there are two conflicting views: short term focus and long term focus. The short-termers espouse tracking your expenses for a little while and maintaining short term goals that can be easily and quickly accomplished. The long-term people, or lifers if you will, believe that tracking should happen on a daily and indefinite basis. This life long tracking should happen while you are moving toward ever changing short and long term goals. Both sides of the coin have merits, but is there one answer that is truly correct for everyone? No, there is no one size fits all answer, so end of the story right? Before I put down my pen for the day, why not give you a few of the points about each style of budgeting and let you decide for yourself.

Long Term

With long term planning comes daily tracking of your expenditures. This daily tracking needs to happen throughout your life. The basic reasoning behind this method is that we humans are creatures of impulse, so we buy unnecessary items on impulse. While we may have a solid idea of how much our recurring expenses(cable, cellphone, utilities, etc) are, these impulse buys can go under our radar and can lead to uncontrolled spending. By tracking all of these expenses, we can find ways to economize, helping us to build emergency funds and get further ahead for retirement. ”The more we focus on our spending and are conscious of it, the more likely we will be to not overspend,” says New Jersey financial planner Ken Weingarten. The constant tracking allows us to find the money for debt reduction. It also allows us to better monitor our progress toward those debt reduction goals. The lifers also point out that humans tend to forget lesson learned, so long term tracking is needed to keep financial lessons fresh in our minds.

Short Term

Most of the proponents of short term tracking and goals believe that long term budgeting actually causes people to give up. They say that the long term method becomes boring and cumbersome, two factors that make people avoid budgeting altogether. According to Sherman Hanna, a professor at The Ohio State University, long term budgeting requires more effort, time, attention, and honesty than most people are willing to commit. Short term budgeting allows people to find the motivation to pursue a goal that will be achieved quickly; therefore, they achieve their goal before their motivation and attention are exhausted. Short-termers claim that the shock of tracking where their cash goes for three months can often create the motivation to lower those expenditures for the rest of their lives. That motivation over the short term then effectively eliminates the need for long term budgeting.

Personally, I have found that I fall off the frugal bandwagon if I do not track my spending on a daily basis. Sure, it may take me a few months to fall off, but it has happened numerous times. So, I am the guy who stands at the end of the checkout lane writing down what he just spent and assigning it a category. Yes, people look at me funny from time to time. You, on the other hand, may only need that initial shock therapy of three months. So, there you have the answer: the best budgeting method is the one that fits your personality. You can thank me for being so definitive and clear in the comments section.

 

About the author: Jerry Coffey

 

Jerry Coffey spent many years in a debt-riddled gray area somewhere between broke and desperately broke. His seemingly endless need for more and more cash led him to payday loans, repossessions, bankruptcy, and depression. After years of the same financial style, he heard a piece of advice that inspired him to find a way to change. The advice: ''The very definition of a fool is someone who continues to do the same things, but expects different results.'' This led him to a much more frugal lifestyle that sees all of his bills paid on time and a growing savings account. Even the seed of a retirement account has begun to sprout.

 

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One Comment

  1. You really explained the difference between long term and short term budgeting really pretty well there. Thanks man!
    I think I’m part of those people using budget for the long term. I do have and follow my budget every time because I have too many money goals in mind and having my own budget is really helping me achieve them.
    Mark Ross recently posted…15 Ways On How You Can Save Money On GroceriesMy Profile

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