The Purpose of Budgets
Budgets are meant to stop excessive spending right? Get you on track. Rein in your spending. Limit extravagance. Well, that’s only half the story. You see budgets have two purposes, not one. Sure, one purpose is to rein in excessive spending. But there’s another side to that coin. The purpose of budgets is also to help you spend. That’s right, budgets are as much about spending as saving. Let me explain.
Spenders or Savers
All of us fall somewhere on the spectrum between spenders and savers. But where ever you fall, budgets will help you out. Because budgets have two purposes, not one. And each purpose works against our natural tendency. Budgets help savers spend and spenders save. And if you’re somewhere in the middle, you probably need both. So think about your typical saver.
The Purpose of Budgets for Savers
So if you’re a natural saver like me, you don’t really need a budget to rein in your spending. It can help, but you probably watch what you spend naturally. Budgets will however help you to spend on the things that are most important. See I’m such a scrooge I’m not sure I’d ever go on a fancy date, book out a resort or visit the golden arches. But those things are important to others in my family. I need to spend on my marriage and kids, that’s important. So right now, there’s $50 in my budget for dates. That’s $50 I’m meant to spend making my marriage great. And that’s something I really want. That’s worth spending into. But I’m not sure I’d do it if my budget didn’t give me permission. I need my budget to free me to spend, not save. Sounds strange, but it’s true. Chances are you might be just like me. So Budgets are just as needed for savers as they are for spenders.
Savers Without Budgets
Imagine for a moment that you’re saver. But you don’t have a budget. You don’t need one you think. I’m good with money. You watch every penny. ‘Hey, Dad can we go to that concert?’ Mmmm,what a waste you think, $80 to hear that……. No! That’s a word you’re family will hear a lot from you I’m guessing. And in the end you actually hurt yourself. There are important things to spend on and into. There’s a place for generosity and giving, for wooing and treating. A place for holidays and dates. If you’re the natural scrooge, others will likely come to resent it or rebel against it. But there’s a better option. Decide what’s important to you, and give yourself the permission to spend on it. Then you can say yes and still know that you’ll have money to save. Everyone wins. You still get to save an agreed amount, but you also fight against that natural tendency to deny yourself and others. And your life will be all the more richer for it.
The Purpose of Budgets For Spenders
Now you may be more down the natural spending side of the equation. Of course, you need a budget too. You need help to not spend too much on unimportant things. If you splurge all your doe, chances are your retirement will be pretty dour. And when you do need or want to spend on something of real importance, you won’t be able to either. The money just won’t be there. So you need a budget that says, this much and no more. It helps you to not overspend on the less important, so you’ll have more than enough for what is most important. So your kid says, ‘can I go to that concert?’ But if you’re broke because the last big bill wiped you dry. We’ll, you have to say no too! And it’s your fault. No, you need a budget too.
The Purpose of Budgets is for both Spenders and Savers
See both the spender and the saver tend to shoot themselves in the foot. The savers resists spending on what is most important and the spender never has enough to spend on what is most important. Both can end up pretty miserable because of their natural tendency to spend or to save. So that tendency needs to be pushed back on and resisted. And that’s exactly what budgets do. They help savers, spend and spenders, save.
Chances are you may never have thought about budgets like this before. I hope you can see yourself somewhere in here. I hope you can see that you really do need a budget, because budgets have two purposes, not one.
So Now What?
Make yourself up a budget. I’ll be walking through how to do that in my next post or two. So stay tuned. But if you can’t wait. I’d recommend writing up a simple spreadsheet with all you earn and what you plan to spend. Then get an app like, homebudget (one of the best, iOS, Android), to help you track your spending against your budget, so you stay on track. But more on that to come.