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Better than a raise: The smallest thing you can do to make the biggest difference this year

Published: Tuesday, Dec. 10 2013 8:00 a.m. MST

Tori Telfer is a writer living in Chicago and is trying to find the right way to budget.

Tori Telfer

So far, budgeting hasn't quite worked for Tori Telfer, a 26-year-old writer living in Chicago.

Telfer tried using a spreadsheet to budget her expenses.

"It was too involved for me," she says, "because it requires a lot of math."

She also tried using her checkbook to budget, something her parents and grandparents did.

"It was a little old-fashioned for me," she says.

Telfer also tried financial tracking software from Mint.com. She liked the automatic way it gathered information about expenses. But she became disenchanted with it when it assigned wrong categories to purchases — such as identifying a restaurant as a gas station. It also seemed a bit passive to her.

With the Christmas shopping season now in full swing, Telfer and others across the country are trying to make their new year sparkle with fresh budgets and financial resolutions.

A recent Gallup poll found, however, that 68 percent of Americans do not keep a detailed or computerized household budget. Financial services company PNC found that 56 percent of millennials like Telfer found it difficult to stick to a budget. Even if you drop the "detailed" definition of a budget, Pew Research Center found that 51 percent of Americans just don't have any form of a budget.

What makes this a bit alarming is a survey this year by Ameriprise Financial, a Minneapolis-based financial services corporation, which found that 78 percent of Americans expect to be "extremely happy" after they retire. But are they budgeting for that happiness? The survey found that only 46 percent of 50- to 70-year-olds are extremely or very confident they'll be able to afford the basics in retirement like housing, utilities and medical costs.

Around a third of Americans say they don't even know how much money they might need — a clear sign of a lack of budgeting and planning.

As fun as a diet

There are many stories on why people start living on a budget — and even more on why people don't. Telfer, for example, says she doesn't like to constantly think about whether she should be spending or not spending.

"I think it gives money too much power over me," she says

On the other hand, Kate Holmes, a certified financial planner and founder of Belmore Financial in Bellevue, Wash., startted budgeting after she saw how many of her friends were borrowing a lot of money to buy cars in high school. "It freaked me out," she says.

So she worked three jobs and watched expenses carefully to save up enough to buy a car without a loan.

Holmes understands, however, Telfer's feelings about budgeting.

"People look at budgeting like it is going on a diet," Holmes says. "They think only people without money have budgets, so there is this stigma attached. When people go on a diet, all they see are the things they can't do."

Holmes doesn't stop with her diet analogy. She would say Telfer, who says she keeps only keeps a vague idea of expenses and is very careful on purchases, already is on a budget.

"Whether you have a written-out diet or not, everyone has a diet," she says. "You eat what you choose to eat; you make conscious decisions on what you are going to eat every time you sit down at a meal. It is the same thing with budgeting. Some people have it very clearly laid out and they know exactly what they are doing and why. And other people, you are still making decisions every time you go shopping or make a purchase or do a donation."

Budget busters

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