I have a love-hate relationship with my budget but not for the reasons you would think.
I finished up my 2017 budget yesterday–gasp, yes 11 days later than normal. My careful readers know I typically spend New Year’s Day updating my prior year spending and net worth and finalizing my current year budget but not this year. I started working on it in mid-November but sort of forgot that it wasn’t complete. For me, budgeting is such a given that the lack of a budget has no impact.
I’ve been budgeting for 34 years now. My early budgets had 4 categories–rent, car payments, gifts, spending (everything else). I now have 21 categories–I have the various utilities dual home ownership requires and I’ve broken spending down a bit further (vehicle, boat, home improvement etc.). Doing my budget each year takes about an hour and most of it stays the same from year to year. My spending budget is the same as it was 10 years ago–I didn’t spend it all then and I don’t spend it all now.
What I love about my budget is it is a permission to spend plan. If I want to do something, and the cost fits in my budget, I can do it without thinking much about it. I don’t have to finagle, I don’t have to justify, I can just do it. I don’t even care whether I have money in that particular line item–I can save money in one area and spend it in another.
So let’s say in June Mr. Ms. Liz and I decide to take an epic vacation. Let’s say my $10,000 budget for vacations (yep, it’s that high–I’m retired after all!) isn’t adequate for my portion of this epic trip. But in June, I am under budget on my spending category by $2,000. I can put that $2,000 towards the epic vacation without much thought. It was budgeted and it wasn’t spent so it is available for whatever I want.
In a strange way, budgeting is freeing. I don’t have to think or worry (I’m a worrier y’all!) about my money because I have a budget. I know if I stay within my budget, I’ll meet my goals.
What I hate about my budget is it is a permission to spend plan. Last night, I was updating my quicken with the spending I’ve done so far this month. I looked at my income statement and noticed that I haven’t spent much money yet this month. I then started thinking about what I “need” since I have the money to spend.
I try to time infrequent expenses so they don’t cause a budget overage so I’m thinking this might be a good month to buy a new biking helmet. Or I could just spend less than I budgeted and finish the month with a surplus. That’s a great way to start a new year–as long as I don’t crash on my bike . . .
A helmet is a bad example because head protection is super important but sometimes my budget encourages me to spend money on things I don’t value enough.
Each spending decision I make is an effort to balance how much I value this thing or this experience vs. how much I value having this money. If I value what that money can create for me more, then I don’t spend it but if I value the thing or the experience more, then I spend it.
If I feel like I have extra money in my budget, it changes how I evaluate that balance. I demand less value from spending than I should.
I signed up for the Frugalwoods Uber Frugal Month program this month. Partially because I knew I would learn something from Mrs. Frugalwoods and partially because I find her writing and pictures so amusing I knew I would be entertained–and I have not been disappointed.
They don’t budget, because they find a budget to be a permission to spend plan and their goal is to spend $0. I think they’re right–I think I would spend less without a budget. But I think this only because I have budgeted for so long that balancing my spending with my other goals happens automatically.
Not long after I retired, I was chatting with my Mom’s financial planner. He said the thing his retired clients struggle with the most is spending enough money. Their thrifty habits served them well when working towards financial independence but work against them once they have achieved it. They weren’t using their money to live their best life.
His advice to me was to spend more money and live my best life. So I’ll continue to think about my budget as a permission to spend plan–and I’ll be shopping for that helmet this week.
Is your budget a permission to spend plan?