So, you’ve been tracking your spending for a while now. (If you haven’t, get to it!!) You are more aware than ever of your spending choices and some of the emotional issues that underlie some of your purchasing.
The next step is rather simple, though for many its where this process stalls.
We now have the information to put together a meaningful budget.
Arrrgh!! Did he just say budget? Was all this babble about power and force and abundance all a smokescreen to get us to restriction and living with less?
Well, yes and no.
Yes, a key part of a budget, and paying yourself first, is to get ourselves used to living with less. Without a budget to guide my spending, there’s no way of knowing whether I’m heading down the right track. After getting a raise, its all too common to increase my spending until they reach my income and then once again, I’m back to being a paycheck to paycheck person. There’s no freedom in this way of living. Its simply consuming as much as I can constrained only by what the system is willing to give me for the work that I do.
And that’s not a very creative way to live.
So no, budgeting is not just about learning to live with less. Its about learning to spend my financial energy in ways that align with what matters most to me.
What future do you want to live in?
What dreams to you have that would be easier if you had more money to do them?
For each of these, a budget is the tool that protects us from ourselves when we aren’t focused on creating our lives in the best way. Its a way of structuring our financial lives so that systemically we are creating the space for what is important.
Will this feel good all the time? Probably not. Its a bit like building up a muscle. I know when I started running, or when I startup again after a break, the first few weeks don’t feel good at all. However, soon enough that phase passes, and I start to come back from runs feeling enlivened, not drained, and the positive feedback loop begins.
Its the same with a budget. I was talking with someone last week and they were talking about the benefits they were getting from not spending money. This was in marked contrast to previous conversations where trying to not spend money felt cramped, or restrictive. The difference between the two positions is significant, though the benefits will not show themselves for some time.
There are several reasons why budgeting has power
1. Keeping a budget keeps me honest
Who hasn’t has an experience of mentally keeping track of something and when asked answered with a vague, “Oh, probably about this or that much”. Its only when I start tracking my spending, seeing where its actually going, that the stark truth comes out. Sure, this is only one kind of truth, and not the most important, but its a necessary step.
2. Knowing where I am in terms of my budget increases my financial awareness
When its the first week of the month (assuming a monthly budget) and I’m considering whether I want to eat at a cafe for lunch, I know that my budget stretches to 3 or 4 of these each month, and I may not want to use it up early. For some, this will feel like unnecessary brain chatter – who cares they say – that’s exactly the sort of penny-pinching I want to avoid. Well – avoid it at your peril, because the truth of the empty wallet, or bank account will get you anyway, only then you’ll have the paper-thin excuse that you had ‘no idea’ that you were skint. As your financial awareness grows, it becomes somewhat second nature to be able to feel into a financial choice, and make a decision that sits right.
3. I move from victim to being in control
What? How can I be in control when the budget is controlling me. If that’s how it feels, you may not yet be ready for this. The budget is under your control. Truly, it is – if you don’t believe me go ahead and increase the amount in the budget. You do have that power. Now, you may not like the overall size of the budget – you may still be the ‘victim’ of our financial circumstances, but that’s different from being the victim of your budget. In fact, your budget is just a tool to align your spending with your overall goals. And as you exercise your power in this small way, you increase the possibility of more aligned future flows.
4. You are setting yourself up for bigger future rewards
When I started running, I had no idea that one day I would be capable of running 50 miles. At that time, the thought of running 10km was entirely crazy. If you’re just starting out setting up a budget, the thought of sitting on a savings account that has hundreds of thousands of dollars in it may seem an impossible dream. Yet, this is a direct step on the way to that outcome. Yes, there will be choices to make along the way, but if you can learn to live within your means, and then find a way to increase your income while staying content with your life (and we are creatures of habit, so we are really good at this!!), then there’s a really good chance of growing a significant nest egg.
These are only some of the benefits of setting up and living out a budget. I won’t go into the ins and outs of how to set this up – a quick search will show you plenty of good information. What I would say at this stage is to not try for too much – if you’re spending all your money at present, why not try to setup a budget where you save 5% of it. If you pay yourself that money first (IE, before it even hits your spending account), there’s no way you’ll miss it. It may not add up to much, but when you look at the saved amount in a few months, and recognise that you are capable of saving, that may be a a time to spend a bit of that money in celebration…