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Jun 11, 2015

Agree or Disagree: “Budgeting Doesn’t Work”

I thought this Slate column written by Helaine Olen would serve as a good starting point for an in-class debate about budgeting:

Actually, let’s discuss your budget. I’d rather. Wait, you don’t keep a budget? You probably don’t. In 2013, Gallup found only a third of us keep formal track of our inflows and outflows. In 2014, Experian Consumer Services said it was 39 percent of us.

But does it matter? Probably not. No one less than Bill Harris, co-founder and CEO of online money advisory service Personal Capital, and former CEO of Intuit, claimed in an interview last year, “budgeting doesn’t work.”

This, of course, is heresy. Just about every personal finance sort out there will tell you living without determining in advance what you will spend on housing, health care, food, transportation, and fun is a future financial disaster waiting to happen.

While most personal finance experts highlight the importance of budgeting (a failure to plan is a plan for failure…), the survey data cited above consistently shows us that 1) almost 2/3 of people don’t budget and 2) new “Big data” analysis of banking customers by a JP Morgan Chase think tank demonstrates that volatility in monthly income and expenses can make accurate budgeting a real challenge. As students are honing their arguments, they may find skimming the Comments to the Slate article useful. My hope is that the group that takes the side “Budgeting Doesn’t Work” can come up with some ideas on how they can save and control their spending even without a formal budget.

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About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.

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