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Budget, smudget: Why do people hate budgets?

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Hi there!

How do you feel about budgets?  In my experience people fall into 2 camps regarding budgets – love them or hate them. Most people aren’t neutral in their view on budgets.

Many people have the impression that budgets are this restrictive thing that prevents them from doing what they want and following one will lead to an unhappy life.

One would assume that as a person running a personal finance I would fall into the “love” camp and you would be correct. I’ve always wondered why people have such a negative opinion of budgets.  When we think of the actual word budget it could be a noun, verb or adjective (literature lesson on a financial blog…).  The word budget as an adjective (a word describing an noun) means inexpensive.  The word “budget” when placed in from of a nouns gives the impression of cheap, low-cost and discount.  Maybe this is where we feel that having a budget means we will have a cheap life?

Thinking about Budgets Differently:

Instead of thinking about having a budget as having a discounted life, let’s flip the script on that thinking.  If I could throw something into the universe it would be the budget = freedom.  Why you ask?  Having a budget is just a plan for how you are going to be allocating your money.  It’s a control freak’s dream document and I think more people should one have one.  I am personally amazed when I see people who are very much in control every decision that they make in their life however they don’t take the same approach with their money.  Budgets allow for that control and allow you to plan exactly how you want to prioritize your resources.

Does everyone NEED a budget; maybe not.  If you have so much money you have a room full of gold coins you swim in just for fun, then maybe you don’t need one.  If you don’t belong to that very tiny percentage of the population I’m going to tell you it doesn’t hurt to have one.

Let’s dive in (not into the room filled with gold coins) to understand more about why a budget is having the keys to your financial freedom.

Let me start by saying you NEED to be spending less money than you make.  If you previously haven’t been doing that but you are trying now Scott will spend some time talking about debt repayment and how he was able to pay of $11,000 in debt in 1 year.  If you are still spending more money than you make – please stop.  I swear it’s for your own good.

We live in a modern world were so many things are pulling at our attention.  You have a set amount of resources and you have to really prioritize where you allocate them.   This is as true with time as it is with money.  Let’s say you have $3000 a month coming in after taxes.  You have rent, gas, car insurance, internet, cell phone, groceries and personal care and you want to have a life (buy clothes, maybe gifts for others etc).  I’m sure you could manage on that month but if you don’t have a budget and track your spending how do you know that you aren’t a)spending more than you making b)not spending more than what you have to on certain things you don’t deem very important?

Let’s break it down:

a) Not spending more than you are making

Unless you are a super math wiz you probably can’t keep track of all of those numbers in your head along with you bank account balance and what you have already spent in the course of the month.  So having a budget helps you make sure you can cover all of your fixed expenses and have money for variable spending like groceries.  Just keeping track of the money that you have spent ensures you are not spending more than you make.  Simply tracking your money will help you stay accountable.

b)Not spending more than want you have to on certain things you don’t deem very important

There are certain things in my budget that I don’t love spending money on, gifts would be one example.  So when I have my budget I put the bare amount that I need to cover things like birthday cards and that odd invite to a birthday party but it doesn’t take anymore of my resources than it has to.  So the budget helps me prioritize how I would like my money to be allocated.  I can focus more of my attention on things that matter to me like retirement savings and because I have a plan of how the money will be spent and it’s not being gobbled up by spending money on gifts that I’m not keeping track of.

Why budgets are da bomb:

Budgets are a way of planning how you are going to allocate your resources to get the best life possible with what you have.  Also  you get to decide how much money you want to spend on the wants/needs in your life.  Having all of the information in front of you let’s you make an informed decision to do what you want.

What do you think about budgets?  Do you think they are beautiful spending plans to have a wonderful life or a ball and chain that prevent you have having the life that you want?  We would love to hear your comments below.  Let us know what you think.

Quote of the Week: “A budget is telling your money where to go instead of wondering where it went.” Dave Ramsey

Take Care – Sarah

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P.S. Next week Scott will throw a sports analogy at you and tell you how hockey salary caps relate to your household budget! Stay tuned and have a wonderful week!

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