Conceptualizing the Budget
I am a “Why” guy. What I mean by that is I like to understand why I am doing something. An understanding of why helps me to better appreciate whatever task is at hand. Take for example at work, your boss assigns a new project to you and says, “I need this done and ready to present by Thursday.” Ok, you are capable of doing it, but what is the motivation?
Sometimes “because it is your job” is not enough. Say instead, that your boss said, “I just found out we have just a few days to get this new program approved for our department. It is really going to be a great benefit to our team. I need you to come up with a proposal that has a positive spin. Make sure you include the long-term cost and time savings. Trust me, this is going to be a huge benefit to our team. We only have until Thursday to get it ready for presentation to the executive team for approval. Do you think you can handle it?”
How much better is that? You have some understanding of what it is, that it is going to save money and time, and that if it doesn’t get presented by Thursday, we are going to miss an opportunity. It helps motivate you to complete the assignment.
I could simply say, we all need to have a personal budget and here is how to make one. Instead, I am going to break this down slowly. I want us to think about why we would have a budget? What are the benefits? Do we have negative thoughts giving us excuses why budgeting is hard, meaningless, or useless? There may be a time in your life where budgeting isn’t as important, but if you are beginning your own Destination My FI, it may be worth considering.
Why Budget?
Why would anyone ever want to talk about budgets? Just on the surface, a budget sounds like a lot of work. Who has the mental capacity and time to process, maintain, and analyze a budget? Budgets are really for nerdy accountants (my apologies to the accountants reading this) and lording micro-managers (no apologies to micro-managers). Businesses use budgets. Building projects use budgets. Governments use budgets (kind of). Why would Mr. and Mrs. Youme need to use a budget? Why would anyone want that added work and stress?
We have all heard or even said the argument ourselves that budgets are overbearing and restrictive. Throughout my years, I have heard many people say things like, “I don’t want to live my life based on a budget. I want to be free to do whatever I want, go wherever I want, and buy whatever I want.” They honestly believe that a budget will keep them from living! I would be terrified too! Really, who wants to live in shackles we are choosing to put on ourselves?
My intent in writing this is to dispel the myths around budgeting. I hope to be able to show you not only the ‘Why’ behind budgeting, but show you how simple it can be.
Restriction or Freedom?
Let’s start with the myth that budgeting is restrictive. What one person observes to be restrictive, another sees as freedom. People have been debating and arguing about rules and restrictions since the first ones were enacted. What one sees as a barrier to living, another sees as freedom to live.
We have heard it said that we should not lie, steal, and murder. Many societies (like the USA) have these written into their laws. They may seem restrictive if we look at them as just rules for us to live by. But what happens when we turn these around and apply them to someone other than ourselves. Think about yourself as the victim of these violations. Do you enjoy it when people lie to you? How do you feel when someone steals something you own? What would it be like (and I hope this has never happened to you) if someone murdered someone you loved deeply? Guidelines like these for living no longer seem to be laws at all, but just reasonable, common decency. This is loving and treating people as you would want to be.
We put railings on the edges of high places. As much as we would love to be able to jump and spread our wings, the truth is; gravity is a real law of nature and we do not have wings. The railing is not to restrict your freedom, but to protect you from falling to your certain death.
People wear shoes on their feet. Think about a shoe. You are strapping your foot up in a boot of sorts. You lace it up tight, it can be hot, and it’s difficult to wiggle your toes. Why would you want that kind of restriction?
Well, for beginners, the shoe has a sole. It is designed to add a layer between the bottom of your foot with the ground you are walking. Most of us can walk through a city or tromp though the woods without the fear of getting glass, gravel, or thorns in our feet. But that’s not all, many shoes are designed to add a level of comfort. They have a certain level of shock absorption to prevent stress to your joints and back. All of these “restrictions” actually begin to manifest themselves as “freedoms”. Now you can travel further on foot with less fatigue and without the risk of injury. This should be liberating!
I am a freedom loving guy. In fact, I believe the more rules, the more complicated life becomes. It is one thing when rules are imposed on you and another when you make rules for yourself. The whole idea of a budget is setting parameters that will you allow you to live your financial life to the max, while reducing risk of failure. This is important stuff! This is legacy changing stuff!
Future Forward Thinking
When we begin to create a budget, we are not setting our minds in the here and now. At a minimum, we are looking at how to make ends meet. But we should also be looking to implement a savings/investing objective into our plan. We are looking to the future. We are planning our lives on the hope that one day we won’t be stuck in a job we don’t like. We are deciding now that we don’t want to be bagging groceries to make ends meet in our 60’s and 70’s. We are thinking about our progeny and setting them up for a good life. We are thinking about having excess to give. We are thinking about that business we have dreamed of starting one day. We are Destination My FI thinking!
I know what some of you are thinking. I have heard all the excuses for not budgeting before. “What if I don’t live to an old age? I’d sacrifice enjoying life now, to budget and save, just to leave it all behind.” Another excuse I have heard is, “I love my job. I don’t plan to ever do anything else. I want to retire doing this!” Or how about, “I wasn’t born with money and I have no desire to be rich. I am fine as long as I can make my payments.” I have heard arguments like these many times. In fact, there is so much wrong within these statements, it’s a lot to unpack. I am going to attempt to argue against this line of thinking.
Let’s start here. For those that say, “What if I don’t live to be an old age?”, I say, “What if you do?” You have a better chance at living out a long full life then dying young. I have never known anyone who plans to check out early. Does it happen sometimes, of course! But we don’t plan our lives based on dying early. Most people on this planet hope for many years with their loved ones and friends. So, I ask, what if you live a long time, then what? Let’s plan for that!
As for “saving and missing out on life,” that is the negative messaging in our heads that says budgeting is restrictive. Finding enjoyment in life does not come from spending money. This concept was discussed in an earlier post. I have already shown, and plan to continue to show you that budgeting is a great liberator. It brings freedom!
“I love my job. I don’t ever want to do anything else.” How can that possibly be an absolute statement? How can we know? I worked for the same company for 25+ years. When I started, I loved it. Later, the job changed and I didn’t love it so much. Then about 22 years into my career, I got cancer. Although I am in remission and have no signs of disease now, I have difficulty doing some of the things I used to do, due to physical constraints. On top of that, just months before my 25th anniversary, the company went through a major restructuring to a whole new entity. I was thrust into a new building, new division, new management, and new team, doing an entire new line of work.
This can happen to you too! Just because we love a job now, does not mean the one we love will always exist for us. It may change or go away. I even know many business owners that have had their business go away. They either didn’t manage the business well, couldn’t keep up with the changing times, or the demand for what they did simply dried up. We might not want to leave the job or business we love, but the job or business we love may leave us!
A life event may change the way we can work. You might not get cancer like I did, but you might find yourself taking care of a spouse, a child, or an aging parent. It could be a positive change in your life, like getting married or having children. These things really can change our priorities. I have known many people who have had children and decided they were missing too much time with them for a demanding job. Suddenly we either have to change to meet a need or find ourselves loving something more than our work.
For those of you that have “no desire to be rich,” I get it. That was never a primary motivation for me either. I am going to expound on this later, but for now it will suffice to say, budgeting is not about getting rich. Can it? By all means, yes! Does it have too? No. It is about living our life to get maximum freedom. If your thing is donating your time to help those in need, this helps ensure you will have the time to do so. If you enjoy giving, it ensures you have money to do it without missing your rent and risk being kicked out of your apartment. Even if you did inadvertently or intentionally become rich, it could give you more funds and freedom to give of yourself like you never thought possible.
What does life look like now? Do you feel slave to the paycheck? Do you know where your headed financially? As you look at your future, where do you see yourself? What do you want to be able to do for your family and friends? What is your legacy (and I am not necessarily talking about your wealth here)? How can creating a budget line up with your core values? Are you a future forward Destination My FI thinker?