As a budget coach, I think the answer to this is always. It is an unfortunate misconception that most people seem to think that they only need to budget when money is tight. But this view of budgeting seriously understates the powerful impact a good budget will have on a person’s long term wealth.

• In my role as a portfolio manager, I have managed multi-million dollar portfolios. It is rarely the people with the high paying jobs that have the greatest wealth but rather those that have earned modest incomes, budgeted well, and consistently grown their savings that end up the wealthiest. Having a high income is never enough, it is what you do with what you earn that has the biggest impact on your long term wealth.

• It is too easy to forget that what we are doing when we go to work is trading our most valuable resource, ‘time’, in return for money. Your average Australian earns $60,000, or $45,000 after tax and superannuation. This means every dollar you earn costs you 2.33 minutes of your life. Every time you spend $206 you will need to add another 88 minutes of work to make it back. In my experience as a budget coach, the average person manages to save around $500 / month in savings when they start budgeting. This equates to 2.5 days/month of your life reclaimed from unintentional or frivolous spending.  When you look at that over a full year,  your 2.5 days saved per month equates to 30 days a year that you would not have to work if you committed to living to a budget.

• I regularly meet people who are on the cusp of making big financial decisions such as buying a house, starting a family, changing careers, or starting a business. These are big and potentially very stressful decisions. However, they are so much easier when we can quantify our current financial position.The first thing I always do when walking people through these decisions is I get them to do a budget. Once they have thoroughly identified their income and expenses, we instantly get a black and white answer to a whole range of seemingly difficult questions. For instance, we know exactly how much they need to live on, we know how much they can afford to save, we know how long it will take them to pay off debt or achieve a savings goal, we know what size mortgage they can afford, how much savings they need before they can start their own business and the list goes on. Having a good budget will always ensure you can make wise objective decisions about your finances rather than relying on sheer dumb luck.

• One of the places I believe a budget makes the most difference is in our relationships. I regularly run workshops and courses for young couples to help them get on the same page with their finances. It will come as no surprise to anyone that communication regarding money is the number one reason for divorce in Australia and in most Western nations. Since we come from different back grounds, with different experiences of money and have different expectations of money, it is no surprise that when people come together as a couple, money can be a major source of friction. Setting up a budget gives you a positive forum in which to discuss your priorities, goals and objectives and then to agree on spending boundaries. Couples find such freedom in having mutual agreed spending boundaries that work towards mutually agreed goals.

• While this list could go on a lot longer I will finish with the simple little fact that a budget offers freedom from fear and guilt. So often when our finances are a little out of control we feel guilty about spending on fun stuff because deep down we know we can’t afford it. In the back of our mind, we have a long list of unfunded upcoming bills that rob us of the enjoyment of spending. The beauty of a budget is that you can allocate for fun stuff and know that it is there to be spent and enjoyed because all the bills and other expenses have also been allocated for and are covered within the budget. People mistakenly believe that a budget takes away freedom but this is so wrong. There is no freedom in spending if it comes with an underlying sense of guilt and remorse. A proper budget empowers people to make wise decisions, decisions that come without fear and without guilt.

So when do you need to budget? If you ultimately want to maximise your financial situation, spend less of your life working, make better financial decisions, make money a strong aspect of relationship and spend money on yourself without guilt, then, put simply, you need to budget!