Why does a budget matter?
I have noticed that articles on the topic of managing finances emphasize almost exclusively the mechanics of the task: collecting bank and credit card statements, establishing financial goals, and allocating fixed allowances to different categories of expenditure.
Granted, that advice is important, but I believe that two things must happen first: establishing the proper mindset and understanding of the reasons behind the application of the mechanics.
It has been my experience that a budget is more than the sum of its parts. Yes, you can assemble your credit card statements, assess how much you spend, and come up with a plan for your financial future. You may even stick to it for some time. But, I believe that approach lacks a crucial detail: Creating a budget isn’t just about the money that, by whatever means, comes into your household and is spent.
Creating a budget is about your life and how you choose to live it, now and in the future. Money is only one of many resources that feed and support the ideas that give life meaning.
If you choose to approach budgeting as a chore and burden, you may as well not bother. A budget will not be of any importance to you unless you have the intellectual and emotional interest in deriving as much good from it as you can. You have to know why a budget is important to your life beyond the possible financial benefits, and it must be a task you embark on willingly for yourself and/or your family.
That being said, I am not surprised that money monopolizes the discussion around budgeting. It is crucial to properly manage this resource because while money doesn’t buy happiness, it does go a long way to buying a sense of security, which in turn allows the other resources that feed and support life to flourish: physical health, mental health, time, energy, passion. All of these resources should play a part in your budget, and yet I so rarely read about them in that context. Why not?
I would like to make the argument that, to create the best possible budget you can, a holistic approach is necessary.
What does this mean? Consider this fact:
Life starts at birth and ends at death. We all go through this journey from point A to B, and though no two paths are identical, we all share one undeniable truth: we can move in no direction but forward. There is no doubling back to repeat time or events.
What does this have to do with creating a budget?
Knowing life moves inexorably forward, wouldn’t you rather create a life and financial plan now? Although it is possible to start at any age and in any life circumstance, the truth is that it’s better to start as soon as you can because you can’t wake up one day and decide to turn back time to make different decisions. So start now.
What is a budget?
If life is to be imagined as a journey, then imagine a budget as the map by which to find your way.
Life is long and eventful. No current state of being (or future imagined state of being) is guaranteed to last. That is a neutral statement: in some cases, it may be a psalm for your soul, a tether to help you overcome adversity; at other times, it may be a humbling reminder that the good fortune you are experiencing should not be taken for granted, that it should be appreciated while it lasts and cherished once it’s past.
A budget isn’t a fixed course that can’t be altered once decided upon, but rather a map of possible highways, side roads, detours, overpasses, etc you can (read: should) consult at every step of the way to decide whether to forgo, modify, or maintain your current trajectory.
That being said, a map alone will not move you along to the landmarks (goals) you wish to visit. There are other factors to consider. Such as:
⏩ The vehicle (body) you’re travelling in should be properly maintained (physical & mental health)
⏩ The road selected may prove rougher and longer than anticipated when planned on the map; or perhaps you’ve tried to fit too many out-of-the-way pit stops (time, energy, passions)
⏩ Even the best-planned map will fail if your GPS (habits of behaviour) has a tendency to regularly malfunction and lead you astray.
Shouldn’t all of these factors be accounted for in your budget? Because how in the world do you expect to travel at a consistent clip in the right direction if your car is leaking oil, your brakes are overheating, and your GPS keeps insisting that driving off the next cliff is the way to the closest mechanic shop?
To end the metaphor, properly allocating the funds you hold at your disposal is only part of the overall picture. How can you hope to stay on track if the habits you nourish, consciously or unconsciously, constantly undermine your efforts, and possibly your physical and mental health as well?
Creating a budget in this way will force you to examine your life in its entirety, and that may unearth some demons; it may force you to confront and slay some dragons. But, if you’re honest with yourself about your intentions and where you want to go, then it will be worth it in the long run.
About this series “Learning to Budget”:
“A journey of a thousand miles begins with a single step”
This single step must then be followed by many, many more.
I’d like to break down the process of creating a budget into a series of step. Each step taken on its own is not a budget, but put together they will constitute what is referred to as “a budget.”
I will initially focus on finances (from credit cards to food to vehicle maintenance) because I believe that discussing finances will naturally lead to discussions about the other aspects I’ve already mentioned.
My goal for this series is two-fold:
⏩ First, I’d like to help you streamline the “basic” task of monthly finances so that it’s as quick and painless as it can possibly be. There is nothing worse than making this task any longer than it has to be because of inefficient set up (can’t find the calculator, can’t remember the credit card login website address or login information, etc…)
⏩ Second, I’d like to help you create a habit of budgeting in your daily life so that this idea of “monthly finances” becomes a thing of the past. I believe that the best kind of budgeting is when it becomes second nature, a pattern of behaviour you practice on a daily basis, without force or coercion.
A caveat: These are goals. They will not be achieved overnight.
I hope to pace this series in a way that allows you time to apply suggestions and see how they work for you. Keep in mind that it is always recommended to modify all suggestions to your circumstances. Taking time to implement each step before starting the next also ensures you have time to experiment with what works and what doesn’t.
I will be sharing the methods that work for me. I believe they’re as good a template as any for anyone to start with; but, obviously, you don’t live my life and will have needs of your own to address that I may not. Use my suggestions as a starting point to examine your life and create a budget that works for you.
Who am I to tell you this, anyway?
I am a twenty-eight year old woman living in British Columbia, Canada, and I started to learn how to budget for a household about three and a half years ago.
I am currently a housewife, so I claim no income to the federal government, and my husband claims an income of less than $20,000 a year. This places us well below the poverty line in our region.
Despite this, here are some facts about our finances:
⏩ We have no debt
⏩ We have almost have 5 figures in our savings account (we’re saving up for a down payment on a house)
⏩ I have a credit score in the 800s (as told to me by my bank when I applied, and was accepted, for a mortgage loan last year)
⏩ I was recently approved by my bank for a credit card with an interest rate of 11.9%, despite the fact that the credit card company rejected my application (due to insufficient income) when I applied through their online portal.
Living below the poverty line like we do, it would be easy to overspend, fall behind on credit card payments, and start accruing debt.
If I am able to claim these facts as my reality, it is because I have learned to live within my means thanks to having created a habit of financial budgeting (I am now working on budgeting other areas of my life, always a work in process!)
This is not a straightforward process. I still struggle daily against impulsive purchases. I have a terrible tendency to rush headlong into things (activities, hobbies, projects…) without first fully considering the time commitments or the consequences on the other duties in my life.
Prime example: I rushed headlong into the commitment of writing for this blog, caught up in my enthusiasm as I so often am.
But, upon further reflection, I realized that this was a timely opportunity. By sharing what I’ve learned about budgeting and life, I can hopefully not only help you, but gain even further insights into myself and what I am learning.
I also realized that if I can do it with such a limited income at my disposal, then chances are that you can do it, too. And I’d like to help.
Your assignment for the week:
As I’ve mentioned in this article, time is also an important resource. In our contemporary world, we are convinced that everything has to happen fast, that things must always be happening, that to slow down is DEATH!
I assure you, that is not the case. Slowing down is more often than not beneficiary.
In this series, I will take my time, and I encourage you to do so as well.
Each article will focus on one aspect of budgeting, and I will leave you the week to digest the information provided and complete the suggestions provided.
For this week, I’d like to encourage you to take no action, just try to be aware of your intention to create a budget—or rather, of your intention to improve your life. Every time you spend money, or even think about spending money, try to bring to mind your intention to start a budget. Ask yourself questions such as:
⏩ Is this purchase a necessity or a whim?
⏩ Is this purchase driven by a feeling of entitlement (if Random Coworker has one then I need one, too) or a desire to keep up appearances (what will Richer-Than-Me Neighbour think of me if I don’t have one too)?
⏩ What need is this purchase fulfilling in yourself? Is this a need you want to be encouraging?
⏩ Could you potentially do without this purchase? Would it negatively impact the quality of your life if you did or do you just think it would?
Let these thoughts, and others that arise, drift into your consciousness and see where they lead you. You may choose to write some of these thoughts down, but it’s not necessary. The idea here is just to start prepping your mind and body for the changes you will implement in the future.
To return to our metaphor, think of it this way:
For a very long time, you have been driving furiously, focused single-mindedly on the fact of moving rather than consciously deliberating on where you’re heading and which road you’re taking to get there.
This week, park your car to the side of the road (or anchor your boat or land your plane) and step out. Look around you at the scenery—assess: is this where you want to be? Is this even where you thought you were?
Resist the impulse to run back to your vehicle and drive/sail/fly off again to find a better path. You won’t find it in this mindset.
Rather, take the time to stretch your legs. Just because you may have taken a wrong turn at some point doesn’t mean there isn’t beauty to be seen and admired.
This week, take the time to become aware of where you are with the eyes of a tourist and passenger, not with the eyes of a cynical local or harried driver.
There will be plenty of time later to get moving again. For now, just take a break and see what happens. You don’t have to write anything down, but try and retain memory of the feelings that arise; they will help guide you when you plan your new road map and resume your journey.
I took this picture about three years ago:
I had only been with my husband for a few months, and we pulled over to the side of the road on the way home from a road trip. That’s my husband standing at the end of the dock. I had an intuition back then that I was making the right decision by choosing him, despite arduous opposition from my family, and looking at this picture now, I am filled with the buoyant joy and relief that it was indeed the right decision. Choosing him set me on a path that taught me exactly what I yearned to learn (despite many growing pains, even to this day).
When I look at this picture today, I see the horizon in the distance, and I feel ready to stand up to whatever challenges await me there.
Head over to the series masterpost to start the series from the beginning or to find a specific article within the series.