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Tori Telfer
Tori Telfer is a writer living in Chicago and is trying to find the right way to budget.
People look at budgeting like it is going on a diet. 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. —Kate Holmes, a certified financial planner and founder of Belmore Financial in Bellevue, Wash.

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

Arthur Moye, a CPA with MBS Accountancy Corporation in Fresno, Calif., was forced into budgeting, he says, back in college.

"I had very little money," he says, "and wondered how I was going to feed myself."

Because his parents had a lot of credit card debt, he says, he was deathly afraid of credit cards and avoided debt at all costs. "I became really good at budgeting," he says.

He also become sensitized to the things that bust budgets — and, as a CPA, sees how people mess up their financial lives.

And it doesn't take long before people are big in debt. A NerdWallet.com analysis finds that the average credit card debt is $15,112, the average mortgage debt is $146,215 and the average student loan debt is $31,240.

The problem is people do not plan for things that happen and can happen on a regular basis — such as needing an oil change or paying auto licensing fees — and put them on their credit cards.

He also sees how people let their expenses surpass their income — no matter what the income.

Four simple rules

Mark Butler, director of outreach for Lehi, Utah-based budgeting software company, You Need A Budget, says there are four basic budgeting rules

The first rule is to give every dollar a job. This means to assign money to things for it to do — such as pay a bill, pay down debt, go toward saving for retirement and so forth. It is a focus of looking forward to what it will do — and not as much a focus on what it did.

The second rule is to save for a rainy day. For example, everybody knows that holiday shopping is a big expense. By dividing that expense over a year and putting aside money each month, a person can be ready for the holidays without going into debt.

The third rule is to roll with the punches. This means that nobody is perfect and, even with the best planning, unexpected expenses will crop up. When faced with such expenses, don't panic, just shift from other categories as best you can — cutting here and there.

The fourth rule is to live on last month's income. This breaks the month-to-month problem and reduces the stress of paycheck-to-paycheck living, Butler says. It requires several months of savings to get ahead a month, but when accumulated, Butler says it removes the unknown.

Good money gone

Before he started working at You Need A Budget, Butler really needed a budget. He owned two small software businesses and had cash flowing in. "During my five years of self-employment, I made really good money," he says.

He was also always broke.

"I wasn't following a good method for managing money," he says.

Ultimately, he sold his businesses.

"There was a windfall," he says. "Just enough money to bring my debts close to zero."

On a fluke, Butler decided to try the You Need A Budget software. "The commitment to start budgeting," he says, "was a commitment to deal with reality. You begin to deal with the truth, and when you deal with the truth you make better decisions."

Butler says that even though he is now making much less, he is much happier.

"Budgeting is freedom," he says.

It also helps keep him on the budgeting bandwagon that a month after he started using the software, he got a job at the company.

Easier ways to start

Will VanderToolen, director of counseling services at AAA Fair Credit Foundation in Salt Lake City, says one easy way to begin budgeting is to just start tracking discretionary spending. "Don't worry about the groceries, housing or other utilities," he says. "Just keep track of how much you spend on things like clothing, entertainment, music, fun, toys for the kids."

Then, use that information to help establish how much you want to spend each month on discretionary things.

Arthur Moye, the CPA in Fresno, says a simple step is just to track everything you spend. It is a first step before planning what to spend. He also says it may help to put that budgeted discretionary spending amount on a prepaid credit card. "When the money on the card is gone," he says, "then you are over budget."

Holmes, the financial planner from Bellevue, Wash. and Butler with You Need a Budget both recommend that a first small step would be to set a purchasing goal — such as saving up for a trip or even something smaller like a snowboard. Decide iwhen you want the item and then divide the cost into that number of months. "It is a good way to see the effects of budgets," Holmes says.

Butler says goals are the essence of what a budget should be.

VanderToolen says that ultimately, budgets are about empowering people.

"The most important math that we will ever do throughout our lives is managing our cash flow," he says.

Discretionary death

Holmes sees discretionary spending as a major way to control cash flow. Planning for the big items doesn't give people any feeling of restrictions — but trying to cut out little purchases here and there can be uncomfortable. But those $3 lattes can add up. "And everybody has their own 'lattes' they want to buy," she says.

Telfer thinks a budget isn't the only way to control purchases.

"I think you can be smart about money," she says, "without explicitly having a budget. Financial advisers would probably disagree that just having a sense of your finances is a feasible way to live."

In the meantime, Telfer hasn't quite found that budgeting magic bullet. She is still open to trying again. It is, after all, almost a new year.

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