In my first article about budgeting, The How and Why of Budgeting, Part I, I said that people generally avoid preparing budgets because they don’t want to be depressed by knowing the details of their finances, since they don’t have enough – or they don’t believe they have enough – financial resources. This was stated by well-known financial advisor Suze Orman on the Oprah Winfrey show in October 2008.
In fact, adhering to a budget is one of the best ways to ensure that you have a financial cushion to sustain you in difficult times. Putting aside money in a savings account or fund out of what you earn, in an amount you can afford periodically, will accomplish that. In that way a budget can be very similar to a savings plan or a retirement plan like an IRA or 401K plan.
The Importance of Incentives When Budgeting
More people would maintain budgets if their accountants help them do it, such as by notifying them when they exceed their budget spending limits, or receive less than what they anticipated receiving. The client would have to report accurately to the accountant for the accountant’s help to be of any value.
An Enrolled Agent I met recently shared with me her experience performing that service for a client. She said the client became upset when having to account to her for spending too much, and she had to discontinue helping the client. I then discussed this topic with a CPA friend of mine, who is knowledgeable and wise, albeit sometimes irascible. He told me my idea to serve as a budget coach is excellent, but that for many years he tried that with several clients, but was unsuccessful. The reason, he explained, was that those clients lacked discipline. They didn’t want to be told by anyone how they should spend their money, not even by their spouses or accountants.