But here’s the thing about budgeting: It’s not fun. At all.
And for that reason, it often ends up just being a waste of time.
“People will try and go on a budget and then after two or three months, they lose their mind, they hate it,” bestselling author and self-made millionaire David Bach told Business Insider during a Facebook LIVE.
Bach likens budgeting to dieting or exercising: If it’s not enjoyable, the chances that you’ll stick with it are pretty slim.
You know the scenario: You go on a diet — cutting out sugar and carbs, counting calories, diligently tracking your meals — and it goes well for a while, but then you get sick of the whole thing and drop it in favour of a cheeseburger and large order of fries.
“The same thing happens with people on financial diets,” Bach writes in his hit book “The Automatic Millionaire,” which is being re-released this month. “For a while, they track every penny they spend. But then one day they can’t take it anymore, and they go off on a shopping binge. There’s no getting around it.”
While the intention of budgeting comes from a good place, its restrictive nature makes it difficult for humans to stick to long-term, according to Bach. “Any system that is designed to control your normal human impulses is ultimately bound to fail,” he writes. “That’s because human beings don’t want to to be controlled. We want to be in control.”
But don’t think Bach is rallying against fiscal responsibility. Rather, he suggests a simple principle to anyone who wants to build wealth: Pay yourself first. Anytime you get paid, put money into your investments, retirement savings, and emergency fund before anything else. Even better, make this transaction automatic so you don’t even have to think about it. Then you’re free to use the rest of your paycheck for bills, groceries, and other expenses after you already have at least 20% put away for yourself.
Bach also recommends tracking where your money goes. He particularly likes sites like Mint.com that streamline the process, essentially doing it for you.
“You can go on Mint.com, link all of your accounts, and in less than 10 minutes track where all your money is going,” he says. “You will find mistakes, you will find where the money’s going every day on everything. You have an instant dashboard online of where the money’s going.”
Watch more from Business Insider’s FB Live interview with David Bach: