When you think of the word budget, what comes to mind?
For many, the idea of a budget is an arbitrary spending plan. The amounts are decided and then set in stone, and set in stone in either direction. If I have a $100 food budget, the thinking is that I can’t spend more than $100, but that I also am totally free to spend up to $100. That is a way to budget, but it is the way that gives budgeting a bad name, and is what I call the fatal flaw in budgeting mentality.
A budget does not have to be an arbitrary spending plan. In fact, I would argue that the more flexible a budget is, the better it will work. Life happens, and we have to adjust. I didn’t have $3700 budgeted for car repairs this month, but they need to be done, and I need to adjust for them. Part of that is my emergency fund, and part of that is budgeted car repair money, but that isn’t enough. The biggest budgeting mistake I could make is now say “I’ve spent my entire $1200 car repair budget for the year now, so I will not save any more money for the future. In fact, I’ve spent 3 years of car repair budgets so I’ll start saving again 4 years from now.”
That may sound silly, but that is what an arbitrary, inflexible budget does. And I don’t think budgets were ever meant to be that way. Somewhere along the line, we equated “budgets” with “rules” and we set them in stone. And then 3/4ths of the world rebelled, as well they should – and budgeting got a completely bad rap. A good budget isn’t a rule, it is a guideline based firmly in the reality of each individual situation.
Effective budgeting can’t be done in an instant. It takes time, and tracking, and understanding how you spend, where you spend, and why you spend. Once you understand where your money is going, then you can split it up into categories for spending purposes. In fact, I’d argue as long as you are keeping track of all your income and expenses in detail, and you are consistently meeting your spending and saving goals, that’s close enough to a budget if it consistently works for you month after month. A budget is a very effective tool, but not if it is used in an arbitrary manner, and an awareness of your spending patterns may be the budget you need.
And that bring us to the “I’ve budgeted $100 for this, so I have to spend $100.” No, you don’t. In fact, much of my debt reduction thus far has come from creating snowflakes out of budget surpluses. I strive to come under budget in every category I can. And when I do, I create a little more money to use for debt reduction.
A budget is also a great savings tool. Budgeting saving a certain amount each month for annual or irregular expenses makes those expenses much easier to deal with once they occur. Budgeting helps, not hurts. My budget serves to keep my days, months, and even entire years on track to meet my goals. And for me, that’s the beauty of budgeting.
Kacie at Sense to save is running a Better Budgeting Challenge, and reading her experiences in the past with budgets is what inspired this post. Thanks, Kacie!