Budgeting is mostly met with groans, sighs or just a general sense of dread. It’s the adult equivalent of being told to go eat your vegetables. Boring, restrictive, no fun.
However when you’re young or just not particularly rich, budgeting is a critical skill to have as it enables you to put aside enough money to start building up your assets. It’s also very important for your general happiness as when we don’t control how we spend or do things, it’s easy to buy everything under the sun which results in you no longer valuing anything.
On the flip side budgeting to excess can be like becoming anorexic, it’s toxic and highly damaging to your health. As such it’s not only important to find a good middle ground to budgeting, but to have a healthy relationship with it so that you can happily continue to adhere to it long term, even when you do become rich one day.
This long term relationship is a must as otherwise you risk never valuing anything in your life and things get silly and out of control. Imagine say, you had $100,000,000. You go out, buy a Ferrari, Porsche, Lamborghini, Bugatti and every other cool looking car you can think of.
After driving around in them for a while it’s not surprising to imagine that you’d no longer really value them very much. Why would you care if your Porsche got stolen seeing as you have 7 other cars?
The healthier way to go about things would be to buy one or two nice cars that mean something to you. That you value, that make you happy and that serve a purpose. That way they get used, you can appreciate them and you’re not wasting the worlds resources for no good reason.
This is also highly important as buying things doesn’t ever make you happy. So a healthy relationship with budgeting is a specific way to ensure that you focus more on what does make you happy. These are things like self fulfilment, loving relationships, long term friendships or meaningful work.
But what is a “healthy relationship” with budgeting? How many cars should the hundred millionaire buy? How strict should you be with your grocery bill?
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Finding Your Middle Ground
Like most things in life, how you view and adhere to a budget will change over your life depending on what stage you’re at. A single mother of three will likely have a much stricter budget than a wealthy retired couple.
If you’re just starting out financially (say 20-25) and don’t have very many (or any!) assets under your belt then I’d recommend being quite strict. Set your budgets and keep them as trim as you can. At this early stage it’s incredibly important to save as much as possible or get out of debt as soon as possible.
While you still want to be spending a little on things that help you build up a business or in general access more income, most other “consumption” based things like eating out, drinking, Netflix etc should be as small as possible. You’re young so no one’s going to really care if you’re drinking the cheap Vodka or beer, make use of it!
This case also applies to those that may be older, but have fallen on rough times. Medical bills, divorce, family issues etc can all either cost a huge amount or derail high earning careers. You might still spend a reasonable amount of money on buying healthy food or an online course to help you learn a new skill, but consumption should be heavily reduced. It’ll not only give you more time to focus on putting the pieces back together but will make that process easier seeing as you’ll have extra money.
Half Way There
If you’re completely out of debt (including the mortgage!) or have loans that you could easily pay off tomorrow by selling the asset for them, you can likely start to ease off a little with budgeting.
It’s important to accept that even if you were the richest person in the world, you should still control your spending and purchases as it’s just not healthy. While originally budgeting was about maximising your savings, now it’s pushing more into the “mental health” reasons.
If you’re out of debt and building up your retirement funds or trying to get to that next level financially, you’re still going to be budgeting and watching what you’re spending quite closely. That being said this level differs from the previous one as you can now afford to make a few splurges here and there.
You can relax a bit on the consumption side or even treat yourself here and there so long as it doesn’t affect your financial goals too much. I’d also recommend making the changes to health related things such as diet or exercise.
Maybe you buy healthier, more expensive food or buy new running shoes a bit more often so the strain on your body long term is smaller. Whatever you chose, try and make it not only a nice splurge, but something that’s also beneficial to your health or financial position in the future.
This way you get to ease up a bit on your strict budget whilst at the same time creating a better future for yourself. Just don’t let it get to your head, you still have to work a job to make ends meet so you’re not home free yet!
To Riches And Beyond
Once you’re debt free and have enough investments behind you that you no longer have to work again it’s likely safe to say you’ll be seeing budgets in a different light yet again.
You probably won’t care how much your food or water bill costs. When buying clothes it won’t really matter if it’s $100 or $500. The assets and savings you’ve built up should be able to withstand even regular splurges of this nature without too much fuss.
As stated earlier on though you should still maintain some form of a budget. While it might no longer have a dollar figure next to it, it’s vital to your mental health. Letting your wants run away and buying 500 pairs of shoes or every piece of technology under the sun won’t help anything. It might be fun for the five seconds of buying high you get in the store, but every second after is usually just a giant pain in the ass.
Where do you store those 500 pairs of shoes? Do you need a bigger house now? Are you going to have someone build a walk in wardrobe? You couldn’t ever wear all of them even if you wore a different pair each day it’d take you almost 2 years just to go through each pair once! How do you clean and maintain them?
Now I’m not saying only have one pair of shoes forever and become a monk either, that’s the thing, you need a healthy balance. Hopefully somewhere closer to the monk side than the 500!
Maintaining that healthy relationship with budgeting will also allow you to spend less time managing your possessions and more time making your life better. Spending more time with family and friends, helping others, seeing your children more if you have them and so on.
Budgeting Is For Life
Its meaning and severity changes throughout life but budgeting should be seen in a much different light than what most see it as. Yes it sucks in the beginning or when times get tough but it’s also what helps you become better and more financially stable in those bad times.
Beyond that you should come to not just accept the idea of always being on a budget but respect it too. It’s not a bad thing, it helps you achieve your goals, to better your life and to maintain your focus on what’s important even when you are as rich as a king.
We shouldn’t hate budgeting, we should thank it!
The benefits include: 1) How to pay off your mortgage faster than 99% of people with one hour a month of work 2) How to get rid of your debt and have the freedom to spend money on the things you love, guilt free 3) Clear outline of how to setup your expenses, mortgage and general finance 4) How offset accounts work and how to get the same result without being gouged by the big banks 5) How to cut through the crap and focus on the things that truly matter when taking down a mortgage 6) How to adjust the strategy so it works for you, even if you have kids, even if you only have one income 7) How to do all of these things and maintain a normal social life (and never be cheap).