The Financial Four Letter Word
Congratulations! You read the title of this post and then continued to read it. I’d venture to guess a fair number of people saw it and quickly moved on thinking to themselves, “yeah right lady; I know where this is going!” That’s right, budgets! I know, I know! I was one of those people once upon a time. I trust that you, much like myself, will read this post when you can handle it. Now, to all you brave souls who are still reading, why are you still reading? Is it because you live life paycheck to paycheck and by the end of the month you’re eating white rice seasoned with Taco Bell hot sauce packets? Or is it because you’ve always lived well within your means but have never actually put it down on paper? Newly married and merging bank accounts for the first time? Maybe you already use a budget and you’re just here to pick apart everything I say; fair enough.
I was once asked the question, “if young people could learn one thing from your successfully retired clients, what would it be?” My instant answer was, “budget!” Grammatically incorrect like that and everything. Truly though, if there was one thing I wish every person YOUNG & OLD understood better it would be the value of a budget. And not a “my bank account is empty so I’m done spending money” kind of budget. I mean a real, documented, pre-spending, detailed budget. And I don’t speak from a place of authority, I speak from a place of experience. I was, at one time, anti-budget. Ask my husband. God bless him, but the day he came home and told me we needed to start living on a budget I may or may not have lovingly told him where he could put that Dave Ramsey podcast he must have listened to that day (in the garbage, people 😊). But, ultimately I agreed. So we sat down and started to write out our budget. As he wrote in our monthly income followed by expenses such as fuel, groceries and insurance I remained fairly disengaged. Then something happened. Jacob included a line for clothes! Clothes, people! They had their own line! Followed by “entertainment” and “holidays” and “gifts.” My whole outlook changed. See, before this moment I had always viewed a budget as a formal slap on the hand anytime I wanted to spend money on something fun. It was my written rules of conduct when it came to spending money. And I think that’s how the majority of us who have never lived on a budget feel. But as soon as we started adding lines for things we enjoyed my thinking changed. I realized a budget wasn’t there to tell me what I couldn’t spend, but rather to tell me what I could. $50. That was it. That’s what I got to spend on clothes. But that single line item in our budget changed my whole perspective. By the end of the month (more like the end of the next day) I was going to be wearing $50 worth of new clothes (spoken like a girl who grew up in ministry & can hit a sale rack like nobody’s business).
Now, years later, we still live on a monthly budget. We have since entered the 21st century and use an app (we use EveryDollar), but the overall budget has changed very little. We have a toddler now, so we might as well just add a line item that says “kid” and put 90% of our income into it, but other than that, very much the same. If there’s something particularly expensive coming up you add it to the budget a few months in advance and save. When the entertainment budget is empty you learned to say “no.” Soon it doesn’t feel like a task or a burden, you live by it. You check the budget before grocery shopping, eating out, buying clothes, etc.
Now, I am not a budgeter by trade. I do not help my clients created budgets. Budgets are a very personal thing. What was “clothes” for me might be “dog outfits” or “garden gnomes” to someone else. I don’t need to know. But what I have found is that the clients who sit before me with financial struggles, marital problems rooted in money or are completely unprepared for retirement are usually the ones that have never lived on a budget. What a budget subconsciously does is forces you to be very realistic about where your money comes from and where it goes. It forces spouses onto the same page; if it ain’t in the budget, it ain’t happening. Without a budget you might not know that you spent $10,000 on cat toys last year. Even with a budget, you might still spend $10,000 on cat toys, but at least you know you have a problem. Budgets are all about telling your money where to go. Even if it’s to weird places. Unless you feel like lying to yourself, there’s no room for fudging in the budget. You make what you make and that’s it. That’s what you get to spend.
Now, I wouldn’t be doing my job if I didn’t strongly encourage you to add a line for saving. Often times people think saving inside their retirement plan at work is going to be enough. It’s not. Don’t leave saving for the leftovers either, because if you’re anything like me, there are no leftovers. Specifics on saving are for another post, so for today, pick a number that pushes you just a little bit outside your comfort zone.
So, how do you build a budget? Begin with your after-tax income. Now, depending on how you feel about tithing and charitable giving, that would be next. Below that begin with mandatory expenses, rent/mortgage, utilities, loan payments, etc. Next is saving. Stretch yourself a little here. Then move to normal monthly expenses that have wiggle room. For example, groceries, fuel and cell phone. You can always drive less or reduce your data plan if you must. And lastly, the fun stuff. This might be vacation savings, a video game fund, eating out, whatever floats your boat. But remember, this is last for a reason. When you are out of money you stop. The budget should have a big fat $0 at the bottom. Staying on track for the first couple months is difficult. The envelope method helped us a lot early on. For each discretionary category in our budget (groceries, eating out, clothes…) we had an envelope filled with the exact amount of cash we had set aside for that purpose. Once the envelope was empty that part of the budget was done. It helped keep us honest.
There you go, your marching orders. Create a budget this month. Just try it! If you hate it you have my permission to come back and leave me a mean little comment about how I’m wrong. But you must first make a real effort. Remember to be kind to yourself. Include lines for things you love. Don’t deprive yourself of everything. And don’t forget to save! Smart savers make smart investors.
