THIS, Not THAT, Is the Real Point of Budgeting

THIS, Not THAT, Is the Real Point of Budgeting

If you’ve resolved to finally 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.

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23 Comments... Read them below or add one of your own
  • J. Money January 6, 2015

    Yes. Love. And not just saying that because I think budgets are sexy 😉

    • Matt Becker January 7, 2015

      Haha, not all budgets are sexy, but you certainly never disappoint!

  • Taylor Lee January 6, 2015

    Absolutely! I feel like people use the word “budget” in the same way they use the term “diet”– as restraint and insufficiency– rather than as what they mean. That is, conscious decisions on how to spend your money (or eat, as the case may be).

    • Matt Becker January 7, 2015

      Good comparison. Another problem with the word “diet” is that it’s typically assumed to mean a short-term but dramatic change in eating habits (usually through some kind of restriction), whereas it’s actually much healthier to first decide exactly what kind of body you want (lean, muscles, lower cholesterol, etc.) and then pick the food that will help you get there. Just like with budgeting, it’s much better to decide what you DO want and send your money there than to focus on a short-term “no spend” diet or something like that.

  • Kathy January 7, 2015

    We don’t budget in the strict sense of the word but we do set spending goals we try not to exceed and we track our spending. We keep track of categories such as electricity and natural gas. During the months when we come in under budget, we transfer the excess money into a “reserve” account and let the balance build. Then during high usage months, such as summer with A/C, the money from the reserve account is available to use if the monthly bill is higher than goal. My husband is a retired accountant and loves playing with the numbers so the process isn’t as cumbersome to him as it might be for those not as numerically inclined.

    • Matt Becker January 7, 2015

      That sounds pretty similar to what we do. We set general spending “goals” and save ahead for irregular expenses, but our goals are really more like long-term trends we would like to see rather than monthly limits. Always nice to have an accountant on your side!

  • Michelle January 7, 2015

    LOVE this post! So many people have asked me why we have a budget. It’s so that I can buy the things I want in life and be able to afford it!

    • Matt Becker January 7, 2015

      Exactly! Having a budget doesn’t mean you don’t spend money. It just means you get to spend more of it on the things you actually care about.

  • Tawcan January 7, 2015

    Love your explaining of why we need to budget. Budget doesn’t mean you don’t spend money ever, it just means you have an idea where your money goes.

  • dojo January 8, 2015

    Budgeting has helped us understand our money mistakes and improving our ‘cashflow’. We don’t plan on living too frugally, but it does help us save more and invest in what really matters to us.

    • Matt Becker January 8, 2015

      That’s great! I know that the simple practice of tracking my spending was huge in identifying my own mistakes as well. There’s nothing like having the numbers right there in front of you.

  • Done by Forty January 8, 2015

    I love the post. And I definitely agree the long term goal of the budget is to align money with the things you think matter. But I wonder: for the person who’s deep in consumer debt, or has a serious problem with spending beyond his means, aren’t the less-fun realities of a budget also pertinent? In the long run, he should be able to put his money towards his true goals. In the short term, the budget might best benefit him by putting a certain amount of money toward some terribly non-fun and uninspiring things like credit card debt.

    • Matt Becker January 10, 2015

      Sure, I think you’re spot on. But I would say that getting debt free is going to be a big part of what that person wants over the long-term. So no, it might not be quite as fun as putting money towards travel or something like that. But it’s still a purposeful use of money towards a meaningful goal.

  • Becca January 11, 2015

    Yes! Budgets (IMHO) are not meant to keep you from having things you want/enjoy – they’re about planning for those things, and prioritizing where your money is going. Of course, I still need some work on figuring out what I really prioritize and finding ways to focus on that and let other things fall away, but it’s a process, and at least I’ve started it, right?

    • Matt Becker January 12, 2015

      It’s definitely a process! I’m still very much in the middle of figuring out my own priorities. I’m not sure it ever stops really, as life is constantly changing. So I think it’s more a matter of constantly being thoughtful as opposed to “figuring it out”.

  • Adam January 12, 2015

    “It’s about using your money purposefully to build a life you love.”

    This is the best explanation I’ve seen yet!

  • Kurt January 13, 2015

    My wife and I have been doing an annual budget since we married in 1997. For many years we compared our monthly spending vs our budget, but now we do that pretty much just annually. We’re not wealthy, but we’re comfortable now and both able to work just part-time. If asked the #1 reason we’ve been able to achieve decent financial success I’d cite our commitment to budgeting! Yeah, it’s a bit of a pain to set up that budget at the start of every year and then track our spending against it. But the pay off has been huge, for us!

    • Matt Becker January 13, 2015

      Couldn’t agree more. Even if you don’t have a traditional budget, having some way of tracking your spending and making sure that you’re staying on track with your big savings goals is huge.

  • Sam July 24, 2018

    Couple of years ago, I took a hard look at my finances ( triggered by an event that is not relevant for this topic here). I came to conclusion that I would never meet my financial goals in life if I don’t do some major course correction. I took few more weeks debating with myself what to do, where to save, where to cut, but could not really decide anything. Then I came across an article about that advocated “saving by spending everything you make” so you can save but with a little tweak. The tweak is saving is now another spending. Along with $10 netflix bill monthly, I started $10 bill that would automatically go into rainy day fund. As my confidence grew, I save much more now. Moved into an apartment that costs $300 cheaper.

    My emergency fund is now $10000 🙂

    So pay your “emergency fund” bill just like you pay your netflix bill. Automate savings, just like you automate bill payments.

    Or start with Acorn 🙂

    • Matt Becker July 24, 2018

      That’s great Sam! Just goes to show what you can accomplish when you put the work in. Thanks for sharing your story.

  • Paul January 22, 2020

    “The right system is the one that works for you”

    So glad to read this! I’ve struggled to implement a “traditional” budget, and tried all sorts of software tools, but the different systems never “clicked” with the way I thought about budgeting, and ended up just being frustrating. Currently my “budget” consists of just tracking how much I spend on “dining out” vs. “groceries”. My theory: spending MORE on groceries should lead to LESS overall. This method has helped me evaluate the trade off between my routine choices – (It helps me decide “this” not “that”), but I don’t feel a need to monitor any other categories at this point.
    Outside of that I just follow 2 rules:
    1-save first (before you spend) and last (whatever you don’t need to spend)
    2-monitor for recurring unnecessary expenses (and eliminate them)

    Rule 1 ensures I’m ready for the future. Rule 2 ensures I’m being intentional and making choices that are valuable to me in the now.

    Thanks for this article Matt. I feel more confident about not using a traditional approach.

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