What is your first thought whenever you hear someone say, "I need to save money. I need a budget." If you're like me, you probably have a sinking feeling in your gut because you know that the "budget thing" isn't really going to work out, but being a good friend you respond, "I think that's a great idea. Go for it!" Creating a budget is a wonderful idea, but the reality is budgets don't work. Here's why:
- Budgets only focus on the short-term.
- Budgets aren't flexible. There's little room for error.
- Budgets have negative psychological connotations. Your subconscious mind focuses only on elimination (what you have to get rid of) and deficiency (what you don't have).
Budgets that are successful are usually for short-term goals such as a down payment on a house or a car. [Or, if you just wait until April when you get your tax refund check you don't have to worry about a budget at all...but I digress.] It's easier to achieve short-term goals because they satisfy your desire for immediate gratification. You've been able to reap the benefits of your sacrifice within a reasonable time frame which produces emotional satisfaction.
Adjusting your life to accommodate a budget is not, by any means, a desirable activity. Living according to a budget forces the inner you to believe that you can't afford what you want and therefore you must eliminate those wants and desires. When the inner you feels like you can't enjoy the fruit of your hard earned income, the inner you gets resentful and the first thing to go is the budget. The budget isn't allowing you to feel good about yourself and now you feel like you don't have any options. So what can you do?
Change your outlook and empower yourself. Now that you know budgets don't work, create a "spending plan." A spending plan puts you in control of your money. According to personal finance blogger Miranda Marquit of PT Money,
"[A] spending plan provides direction. A spending plan seems a little more like actively preparing for the future. Rather than thinking about cutting costs, a spending plan seems to encourage thoughtful financial decisions. You are directing your resources in a way that allows you to accomplish what you want. I prefer using a spending plan to budgeting, making sure that the goals most important to me are taken care of first, and then not worrying too much about whether or not I've "gone over" in the entertainment category. As long as I remain within my means, and have planned for the future, I'm not too concerned about the rest of my budget categories."
In essence, a spending plan helps you focus on the long-term by providing you with options and more flexibility in deciding how you're going to manage your money. Now you have the ability to say to yourself, "I'm allocating a certain amount of money to my bills AND I'm allocating a fixed amount of money to my savings. And if I have any money left over, great! But if I don't then at least I know I have taken care of everything that's important to me."
Good luck!
