Overcoming the Budget Blues
I recently taught a class about budgeting. When
I mention the word budget, most of the class rolled their eyes. Budget
might as well have been a four letter word. Many people have
a negative connotation about budgeting. Some of the reasons and beliefs
for this negative thinking are:
- I do not have the time to do a budget
- I can do a budget for a few months, then something happens (unexpected
expense) so why try
- I do not want to know that I am spending more than I am earning
So if you have these budget blues, what can you do about it?
1) Reframe the Term Budget
As mentioned above, people think of a budget as a four letter word. Many
think a budget is about what they can not spend. Rather,
a budget is a plan of what you can spend. A budget is meant
to change unconscious decisions on where you spend your money into
conscious decisions. Instead
of letting money slip through your fingers for example by making
frivolous
purchases (e.g. purchases that you never use), it is about making purchases
designed to bring you more happiness (see Do
Not Give Up Your Latte). The
key is to stop thinking about a budget from a term that limits your
spending
to
a term
that creates your prosperity. So in reality a budget is a Prosperity
Plan or Spending Plan.
Budget is designed for you to start taking control of your money
instead of money controlling you. If you feel powerless
about what you can not afford because of the economy, then a
budget is the first
step in regaining control of your finances. You can continue
to blame the economy for your issues or you can take action by creating
a budget in order to start controlling the portion of your life that
you have control over (what you spend).
Some people find reframing how they view money useful as well. Some
people have a negative belief about money that it is bad or can lead
to greed and/or corruption. Yet,
if you think of money as a piece of paper (an IOU) used to barter with,
then a budget is more of what I can do (e.g., work) in exchange
for what I want.
2) Move Through Your Fear
One reason for not doing a budget is due to fear which can include
not wanting to see if you are spending more than you are
earning. The
key to fear is to understand that fear will always be there. It
is what we do with fear that is the key. As F.D.R. said,
There is
nothing to fear except fear itself.
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So, if you fear your budget, recognize that you have
fear and move through your fear anyways. If you let
fear stop you from moving forward, then fear will win. Thus,
as F.D.R. said, the only reason to fear is if fear stops you. By
doing a budget, the facts of what you have spent will not change,
just
how
you look
at
the
situation will change. Fear can only stop you
from changing your future for the better by avoiding a budget.
Resistance
is the excuses for avoiding a budget such as saying I
do not have time to do a budget or I do not know how to do a budget. In
reality, everyone knows the basics of a budget (e.g., a list of income
and expenses). People though may not know all the tricks in
doing a budget which is why we have books and internet
for resources to help (for
more information see
Budgeting Basics). So the information is there, it is more of a question
of willingness to find and use this information.
Many people would rather work a few extra hours of overtime
to pay their
bills than
take
a few
hours to
do a budget in order to save money so they do not need
to work extra hours. Sometimes
doing a budget will provide more money than what you can earn by
working a few extra hours. So why do people have an easier
time working than doing a budget? Resistance.
The key is to know that the outcome will benefit you and will not
harm you because you
earn what you earn and have spent what you have spent. A budget
helps you by taking control of your spending by making
spending decisions more conscious. I
have had students tell me that by doing a budget they have found
that they are holding on to their money better because money is
not disappearing out of their wallet anymore. Thus, there is
nothing to lose and so much to gain.
Part of resistance is being worried about what the
outcome will be. Setting a goal of what you want the outcome
will be will make it easier to move forward towards your goal instead
of resisting. The
important parts of goals are:
Have it be realistic (if you do not believe that the
outcome is achievable, then you will not make it happen)
Have it be simple (do not have too many goals that stretch you
too thin; concentrate your energy on a few specific goals at a
time)
Have it be meaningful (what is it that you really want and why
is it important)
Goals should give you a clear picture of what
life will be like when you accomplish it. For example, a goal
to be a millionaire is very popular today. Yet, it is important
to find out why you really want to be a millionaire. Is it
to be debt-free from the rest of your life or is it to give you
more peace of mind? Is
it to be able to travel and spend time with the grandchildren in retirement? If
so, have a clear picture of what it will be like (e.g., sitting out
on
the beach or playing with your grandchildren). Thus,
you have
a
clear
picture
of what you want which will help you overcome the wanting to quit
work when you
are working overtime to put the extra money into savings to achieve
your
goal.
5) Differentiate Between Need & Want
During the first budgeting class that I thought, I had student
say that she had listed all of her expenses yet there was nothing
there to cut (she ad no wants only needs listed). In addition,
her expenses were $100 more per
month
than
her income. I
simply asked her to review her budget again to make sure all her
expenses were really needs. Needless to say within 15
minutes she was able to identify $500 of wants that she could cut. Part
of this was her resistance in not wanting to take control of her
budget. The
other part is that people tend to confuse needs and wants. In
reality, we need only the basic food, shelter, clothing and few other
items. Yet,
food, shelter and clothing are both needs and wants. The need
part is the basics such as rice and beans for food,
a basic one room apartment (shelter) and a sweatshirt and pants
(clothing). Everything
above this is a want. It
is not bad to have wants or to spend money on wants. Yet,
you can not prioritize your wants (to figure out which ones you
want the most)
if
you are classifying your wants as needs.
It is also important to identify your true wants that you get from
material objects. For
example, a student said that she really wanted to buy her granddaughter
a
matching dress (to her dress) for the times when they go out for
the day together. Yet,
in looking at the true want, it was spending the day with her granddaughter
while the dress was something that she thought she needed to. She
found out she could have her want (time with granddaughter) without
needing to buy her
a new dress each time.
In the first step, I discussed reframing how you look at a
budget. Gratitude is one way of doing this. Be grateful
for what you have instead of being disappointed for things
you can not afford. So each week (or each day) make a list
of things that you are grateful for. In doing this list, get
past the material objects and get down to the reasons why you are
grateful. For
example, you may be grateful for your house because it provides
a sense of safety, security, peacefulness. I emphasis this
because you may lose your house in a fire or for other reasons (like
a hurricane). Yet,
safety, security and peacefulness can be attained through other means
other
than specific possessions. If you lose the house, it may seem
like the end of the world, unless you know that safety, security
and peacefulness can be obtained via other means.
One reason why people do not follow through with a
budget is due to focusing on negative outcomes more than positive
outcomes. It
is easy to focus on the negatives in life (e.g., not having enough
to money to pay the bills, rising gas prices, etc.) and it is
typical to overlook the successes such as saving money from not
eating out as much. Reviewing your budget from time to time
(e.g., monthly) can give you clarity on what areas you are improving
on
and on what
areas you still need improvement. It also is an easy way
to see all the things that you were able to afford (things to be
grateful
for).
8) Leave a Little Extra Room
In doing a budget, it is inevitable to forget or to
underestimate an item. For me, I forgot to add a line item
for books and toys for our newborn son to our 2006 budget. For
others, it may be forgetting to increase their property taxes for
a recently
passed
tax levy or
to having more repair bills than anticipated. Having a little
extra room in the budget can ease these issues (up to a point). So
when an extra required item comes up that was not in the budget,
there is a little left over money to pay for it. If unexpected
items do not occur, then there is more money for savings, something
that
many
can benefit
from. When
unexpected items pops up and there is no room in the budget,
then a person
will
need
to choose to:
- Do without (which may not be an option especially for gas prices
and taxes)
- Cut savings (if there is any)
- Cut back somewhere else
- Incur debt
Either way, it will probably lead to the budget blues unless you have
a little extra room in the budget just for these circumstances. However,
many budgets are so tight, the littlest hiccup will disrupt the whole
delicate balance that people try to maintain while living on
the edge.
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