Budgets can be very polarizing; you either love or hate them. For many people, they are a dirty word. Often times, it is because they are worried about living beyond their means and know a budget would prove it. They are not ready to face their reality yet. Let me take the fear out of budgeting and show you how to make one work for you.
It is probably no surprise to learn that I am a huge fan of budgets, and I have heard every excuse as to why they don’t work for you. So I would like to dispel some common myths and invite you to look at budgets in a new light because when done correctly, budgets can be your new best friend. Let’s dig in.
Countless people have attempted to follow a budget, maybe even tried multiple times unsuccessfully. They claim budgets are just too restrictive for them and argue it’s unnecessary. Deep down, they worry that following a budget means fun is no longer an option. This is probably the most popular excuse and myth.
Flip the Switch: Budgets give you freedom. Now you choose how you want to spend your money. When you are just spending with your fingers-crossed and hoping everything will be okay, you really don’t have freedom. It is an illusion. But when you take the time to figure out how much money comes in and how much goes out, than you can start making mindful choices on how you use your money. Maybe you want to cut back on dining out and divert that money into your vacation fund instead. Or cancel the gym membership you never use and put that money in a 529 plan for your children’s college education. Now you can use your money on what matters most, giving you real freedom.
Lesson for Kids: Show them you can live a good life on a budget when you use your money on what matters most. (There is a reason why most adults don’t like budgets. They heard their parents complain about them and were never taught how to use them.)
Budgets can be overwhelming to some people. They open up a spreadsheet, take a look at all the various categories and start hyperventilating. It seems like you need a PhD to budget, so they give up and claim it’s just too complicated.
Flip the Switch: There is no universal “right” budget for everyone but there is a “right” budget for you. There are tons of budget templates online. You need to find the one that works for you and fits your needs. Some people prefer a very thorough budget whereas others need simplicity. The most important thing is actually following a budget, not impressing everyone with your color-coded spreadsheet. Your budget should give you a birds-eye view of how your money is flowing in and out. Now when opportunities appear, like they did for my friend, Anna at Are Ya Gonna Eat That, she can decide whether a half-marathon fits into her budget and participate guilt-free.
Lesson for Kids: Teach kids how to manage budgets now so they won’t be intimidated by them once they leave home. It will already be an ingrained habit. Start with something small, like their birthday party. Once they become teens, show them how to run a household budget.
Some couples appear to be a match made in heaven, except when it comes to finances. One might be a saver while the other is a spender. One wants to follow a budget while the other wants to burn it. So in order to avoid arguing, budget talks disappear and peace reigns once again. Or does it? Most likely you get a temporary reprieve at best.
Flip the Switch: Focus first on setting goals together. When couples work together to achieve common goals, budgeting becomes far less combative. The partner that was initially resistant begins to see how budgeting represents freedom over restriction. You design a budget that works for both of you, even if one person remains responsible for tracking expenses. Budget conversations become optimistic reviews of progress towards goals, rather than pointing fingers and casting blame for overspending.
Lesson for Kids: Demonstrating good communication skills and goal setting with your spouse is a powerful lesson for your kids to observe. Money arguments can tear a family apart but seeing parents handle money in a loving and constructive manner will help shape their own positive money habits and beliefs.
Shannon
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SHANNON RYAN, CFP®
I had no choice but to learn how to manage my money better and it started with a budget followed by discipline to stay on budget.
In the end it all worked out and we're on our way out. I'm sure for a lot of folks the word "budget" is a bad word but if they realized a budget could help them save money and yet still enjoy a shopping trip every now and then they'd start one quick-style.
Great post Shannon! Hope you had a great weekend, happy Monday hon!
Thanks for sharing this post with us Shannon! Have a great weekend :).
Most people who think that "budgets don't work" have never tried one. They really do work and can help you accomplish amazing things if you give it a chance!
I still like to run my budget once or twice a week with pen and paper! Pretty old school for a millennial. :)
The other thing that's helpful for us, but I realize may not be for others, is look at your budget as a long-term trend rather than a month-to-month limit. We look at our average spending over the last 3, 6 and 12 months to make sure that on the whole we're staying on track with our goals. We've rarely ever set hard caps on a category within a given month.
Great tips!