By Alicia Kellebrew
The Village Financial Resource Center
If I had to name the word that I use the most often in a work day that gets the worst rap, it would be the word “budget.” It seems that the mere mention of this word strikes fear, anger, or sadness into the hearts of most people I talk with. The word “budget” seems to call to mind images of some “no-fun-or-frivolity-allowed” Money Police who insist that you spend money only on the necessary but mundane expenses of life such as housing, groceries, utilities, medical care, and debt payments. If this is what the word “budget” calls to mind, is it any wonder that to many it may as well be a four letter word?
Wouldn’t the process of building, sticking to, and adjusting a budget be much more fun if we all put a more positive spin on it? Now, I know I’m starting to sound like a true number nerd or incurable optimist, but as I always tell people: “Borrow my optimism until yours grows in.” I am on a mission to build a better reputation for the budget. After all, if viewed and used, correctly it is the only way to meet your financial goals.
Here are some reasons to see a budget as a positive (and vital!) piece of your financial plan.
- It tells you what your finances are made of: The initial budget, which I affectionately refer to as the “budget blueprint,” often gives people the first glimpse of how their income and expenses are co-existing. Maybe up to this point you haven’t even been aware of just how many things you pay for or how potentially expensive it could all be. While it may be hard to stare this information in the face, it is very powerful and useful knowledge. Pinpointing exactly what you it costs you to live allows you to use anything beyond that amount for savings and/or debt reduction, which helps protect against the unexpected.
- It tells tou where you’ve been: Now that have your “blueprint” you can really see how your management of your finances (or lack thereof) has affected your bottom line. Do you have credit card debt you accumulated because your budget has been left unchecked? It is not uncommon for undetected budget overages to end up on credit cards or as loans. On the flipside, you may see that you have been doing a good job of keeping things in check and putting aside additional funds for savings, but there is always room for improvement.
- It gives you peace of mind: As you work with your budget you will find you come to a place where it will offer a certain peace of mind. You will no longer have to worry about how you will cover everything because everything has its place as long as you stick to the plan. A solid budget covers the essentials, includes funds set aside for emergencies and periodic expenses, and still allows you to incorporate a few things you enjoy into the mix.
- It gives you permission to have a little fun: I find that many people think that a budget means the end of any kind of spending on anything fun, silly, or non-essential. But that’s not the case. By being able to lay out all of the expenses, you will be able to know that you can spend your $20 on eating out, lattes, craft supplies, or hockey tickets without feeling guilty. A successful budget, much like a successful diet, allows a little “wiggle room” for something you love. If a budget is too restrictive you will not be able to stick to it long term.
- It helps you get where you want to be: As human beings we have a tendency to go on autopilot with our spending. If something comes up we just pay for it without necessarily registering what just happened. People often tell me that they get to the end of the month intending to save what was left over but that there never is any. The key to building up savings and/or using additional funds to knock down debts is to write it into your budget. If your goal is to save $50 a month write in a line that says “$50 to savings” and treat it like a fixed expense instead of treating it like an option. By doing this you are making savings a priority.
Bottom Line: It is time for us to stop viewing our budget as the enemy. Its true goal and purpose is to help us get where we want to be and to succeed financially. Maybe if we start viewing it as an ally instead, we could find some enthusiasm for this process and pass it on to others!