“Budget” is Not a Four-Letter Word

“We can tell our values by looking at our checkbook stubs.”

Andy Grove, Founder and CEO of Intel

A lot of people have a serious aversion to the word Budget.  You mention it and you immediately lose them.  Their eyes glaze over, they look uncomfortable, and they try to change the subject.  I think budgets have a bad rap.  Here are some of the misperceptions about budgets: 

• A budget doesn’t control you: you control the budget.
• A budget doesn’t forbid you from spending your money; it simply prevents you from spending more than you have.
• A budget is a tool to help you accomplish things, not a straightjacket to keep you from enjoying things. 
• You don’t have to track every penny to be on a budget.

Recognizing the bad reputation of budgets, Ramit Sethi, in his book I Will Teach You to be Rich,  a great personal finance book aimed at young adults (a group I have found to be especially averse to budgets), attempts to re-brand budgets as Conscious Spending Plans.   I really like that.  It is very descriptive of what a good budget does.  A good budget shouldn’t be overly restricitve, hard to follow, or take a lot of time to track.  It merely demands that you consciously spend your money on the things you value instead of letting it slip through your fingers on the unimportant.

An effective budget should be a tool to help you accomplish the following:

• Save and invest some of what you earn.
• Provide for your needs.
• Pay your obligations.
• Spend the rest on whatever you value. 

There are some great budgeting tools out there, and we will discuss some of them in future posts, but how you accomplish these goals is completely up to you.  You are in charge.  You are responsible.  Experiment and figure out what works for you.  The overall goal is that at the end of the month the way you spent your money reflects the things you truly value.  You work hard for your money, so feel free to spend it; just do it consciously.