Budget Is NOT A Four Letter Word
Ok, ok…for those grammar police out there, let me assure you I know that the word “budget” has 6 letters. That being said, when people hear the word budget, they tend to go to a negative place. I’ve seen the nose crinkle, the eye roll, the shoulder shiver, and my personal favorite the head shake followed by “I’ve tried to budget and it doesn’t work for me”.
People tend to think that budgeting is about restrictions: “I can’t go shopping because I am on a BUDGET.” “I can’t go on vacation because it is not in the BUDGET.” “I can’t eat out because I am on a BUDGET.” THE BUDGET is like their over-protective parent telling them they can’t do what they want when they want.
What if I told you the budget is the opposite of restriction; it is actually freedom?
How would it feel if you went out to dinner and instead of thinking “I should be saving this money” or “I should be paying off debt with the $50 I just spent on margaritas”, you thought to yourself “I am FREE to spend $50 on margaritas tonight!!”. If you put $50 in the budget with the intent of spending it on margaritas, then you are FREE to spend it just as you planned; no guilt, no regret, no shoulda, coulda, woulda.
Fear, guilt, and regret are terrible things to feel when you spend the money you worked hard to earn. Just feeling uncertain about whether or not you can afford something takes away the pleasure you get from buying it.
So how do you avoid those feelings? You use a personalized, goal-optimized budget and you learn to spend your money intentionally on the things that matter to you.
I know what you are thinking – making a budget like that sounds hard. In some ways it is. You have to know what your goals and priorities in life are, but you don’t have to have that all figured out when you start. PRACTICING budgeting will help you figure out what is important to you.
Here is an example: Let’s say you create your budget, and after you pay your life sustaining bills and hopefully save a little money or put some extra to pay down debt, you have $300 left. You really want to take a trip to Europe in a few months, and you really want to buy a new Iphone (I hear the next release will cost a $1000 – yikes). You also enjoy going out to eat. You decide at the first of the month to put $150 in savings for your Europe trip, and $100 in savings for the Iphone, and $50 in the budget to eat-out.
Then a good friend from high school comes to town and wants to go to a pricey restaurant where your meal will completely blow your $50 eating out allocation. This is usually when I people would tell me budgeting doesn’t work. The way I see it, the budget just gave you informed choices to make, and what you choose is going to help you figure out what is really important to you.
Option A – Get the friend to go to a less pricey restaurant, or go to the pricey place and just order food with in your $50 allocation (appetizers).
Option B – If meeting up with this friend at this pricey place is more important than getting an IPhone in 10 months, reduce the amount you saved for the Iphone and use it to go to the restaurant.
Option C – The Iphone is more sacred to you than the European vacation, so you move money from that savings goal to your eating out budget.
There is no RIGHT answer to what YOU choose because what is important to me is not what is important to you. If you can delay getting a new phone or delay going on vacation, and be happy with that choice then make yourself happy. Also take note of the choices you make and how they make you feel. Paying attention to those feelings will help you next month when you try to prioritize where your money will go. After months and months of practicing, you will know what your personal goals are and naturally start prioritizing your money toward the things that matter to you.
(Notice, the example did not suggest dipping into the NEED Categories in the budget, or adjust debt payments. You won’t be happy if they turn off your electricity or evict you from your apartment because you spent money on dinner. I also recommend debt reduction be a priority because when it is paid off you will have more than $300 each month to spend on the life you want, instead of continuing to pay interest on things you bought in the past.)
Hopefully the example showed you two things:
1 – Your Budget can help you make INTENTIONAL decisions with your money. Instead of just financing another night our on your credit card and figuring out how to pay it later, you will know how much left over money you have to spend that month and you can make active decisions on where that money is spent. Choosing your destiny will lead to happiness and less regret.
2 – Life happens even after you make a budget! You didn’t know your friend was coming to town that month so you didn’t know to budget ahead of time, but that doesn’t mean you have to miss out because the dreaded budget says you don’t have the money in that category. It is YOUR money and YOUR budget. YOU are in charge of what it looks like, at the first of the month when you develop it, and all through the month as life unfolds. In fact, the budget gave you more control because now you decide how much to spend, instead of just giving up, putting the whole night on the credit card, and then letting the credit card company dictate how much extra money in interest you will have to pay for months or years for one night out.
One last tip – If you really cannot get over the word “Budget”, then give it a new name. Like I said, you are in control! You can call it whatever you want. I like to call it my FREEDOM FILE. My mom likes to call hers GAME OF BONES. There is no reason budgeting can be fun.
Send in your creative ideas for naming your budget, either on our facebook page (www.facebook.com/glunzfinancialcoaching) or through the contact link on our webpage (www.glunzfinancialcoaching.com). Everyone that sends a name for their budget will get a free 30 min coaching session.