It’s the start of a new year, and if you’ve resolved to take control of your financial situation you might be thinking that your first step is to make a budget.
It’s a good idea. How you use your money today will go a long way towards determining the opportunities you have in front of you in the future.
But budgeting is a step that trips a lot of people up. It can be really hard, especially if you’ve never done it before. And without the right mindset it can leave you feeling worse about your financial situation instead of better, and actually keep you from making progress.
I’d like to help you avoid that frustration and find a system that works.
All this month we’re going to be talking about budgeting. What it means. How to do it. Tools you can use.
I have some unconventional thoughts on this topic, so if you’ve struggled to stick to a budget before (haven’t we all?), I hope you’re willing to give it another shot.
I’d like to guide you through a new way of thinking about budgeting that I hope will make it easier to take control of your money and start building the life you want.
What’s the point of budgeting?
The starting point of a good budgeting system is one simple question: what’s the real point of budgeting?
It’s an important question to ask because the answer can help determine the approach you take to budgeting, and that approach will eventually determine how well it works for you.
So here are my thoughts on what budgeting IS, and what it ISN’T.
THAT is NOT the point of budgeting
The point of budgeting is not to spend as little as possible.
It’s not to make sure you spend the same amount of money each month.
It’s not to analyze every spending decision for whether it’s going to put you over-budget.
It’s not to judge your spending decisions against someone else’s.
It’s not to feel bad about spending money on things you enjoy.
It’s not to check “making a budget” off the personal finance to-do list.
THIS is the point of budgeting
The point of budgeting is to use your money purposefully so that more of it goes towards the things you care about.
That’s it. That’s the entire point.
But what does that mean?
Budgeting is about creating MORE, not LESS. It’s about using your money purposefully to build a life you love.
And that has three important implications.
First, you have to know what’s important to you, what kind of life you’re trying to build. Knowing that will allow you to make purposeful decisions.
Second, the actual system you use doesn’t matter. You could use a traditional budget, or you could automate things to the point that you don’t even need a budget. The right system is the one that works for you, not the one that works for someone else.
Third, you WILL have to make some tough decisions about how to use your money. You’ll have to decide to spend less on some things you enjoy, but aren’t top priorities, in order to free up money for the things that are really important to you. That won’t always be easy.
But budgeting is not about living within rigid limits or decreasing your spending to the bare minimum.
It’s really about the big picture things that you want out of life and using your money to get MORE of those things.
Start with what you want
When you sit down to figure out how you’re going to budget, start with the things you want out of life. Start with your long-term goals, your current passions, the things that bring you happiness.
Your goal is to make it easier to get more of those things in your life, so put those things into your budget first. Figure out how much money you need to make those things happen, and let everything else fall into place around them.
You will still have to make some tough choices, but those choices will be easier when they’re made to support the things you love.