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Do You Need a Budget?

by Lazy Man on 12/19/07

Many people would say this is an easy question to answer. However, I believe the answer depends on the life experience of the person giving the answer. I have asked this very question to many people and the answer is almost always a resounding “yes” or a resounding “no.” I don’t think I’ve ever gotten back an answer of “maybe.”

I’m going to be the one giving back that answer of “maybe.” By many people’s financial standards, I have done very well without ever establishing a budget. In fact, to this day, I don’t know how to balance a checkbook. I have had a healthy income which is part of the reason, but it’s not the main one. I simply evaluate each purchase I make and do my best to determine the value that it represents. I ask myself if I really need the item or service that I’m purchasing. Often, I’ll just put it in the back of my mind for later. If it keeps coming back to the forefront, then it’s worthy of consideration.

A few years back I wanted a Sony Aibo. It was a robotic dog that retailed for thousands of dollars. It was something that failed the “do I need it” test. It also failed the “do I still think about it every day after 20 days” test. Just recently, I noticed that some are available for around 20% of the original price. They are even more advanced than the one I originally wanted. I thought about purchasing one once again, but I haven’t found it for the value that I think an Aibo is worth – probably around $300.

I don’t think my idea of the anti-budget will work for everyone.

There are many people that may be best served by adhering to a strict budget. Some of these people may include those who live on more of a fixed income or saddled with significant debt. However, some of these people might be just the opposite like my best friend. I would estimate that he and his wife have a combined income of roughly $300,000 a year – yet he can boot up his Quicken software and show you exactly how much he has budgeted for vacations this year.

In short, I think that budgeting can help many people maximize their wealth. However, it is important to remember there are often multiple avenues to the same destination. I encourage you to explore each of them to determine which route suits you the best.

Lazy Man has been a lender at Prosper since February 2006. His lending has been written up in the Globe and Mail, Canada’s largest national newspaper. He is the author of the personal finance blog, Lazy Man and Money. He enjoys watching Boston sports while sipping diet cola.

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