With conscious spending, there are no guidelines that dictate what should or should not be spent on a specific expense category. The only right answer is that you should be spending money on things that are meaningful to you and cutting back and eliminate items that have no significance in your life. This kind of freedom can be both liberating and scary, but it’s the only way to understand and strengthen your financial foundation and peace of mind.
Like most people, I am sure that you have some limiting beliefs that you need to dig into. Which is where I come in. I help people at every stage of life and every income level articulate and align their deeply held values with their financial priorities, which is the first step on the path to integrating money and life. I teach people to learn how to adopt some key good money habits of the wealthy.
STOP BEATING YOURSELF — Budgets DO NOT WORK. DO THIS INSTEAD
On a daily basis, I give my potential bankruptcy clients a budget ‘worksheet’ and ask them to fill it in. Typically when I receive it back only the first line is filed in which is the mortgage or rent payment. If I’m lucky they have filled in 4-7 lines. That is all. Why? Because they have never thought about all of their expenses. Most people have no idea where their money is going every month. They only know the month is over and their money barely stretched over their bills and they’re stressed. Sometimes we have a few overachievers that can complete a budget worksheet but can rarely stick it. I have a secret. It’s because they do not work. Here is why…
It is too late.
Most people attempt to begin a budget after they have felt the stress of tight money for too long. This is after the house has been bought, the car has been bought and bad habits have kicked in. Most of us are carrying so much debt that it is nearly impossible to adjust anywhere in the expense category.
Think about this. You decided you wanted to buy a house. Someone told you to go see your banker and apply for a loan. You call or go see the loan broker. They ask for your paycheck stub and check your credit. The come back with a pre-approval telling you that you are approved for a $180,000.00 mortgage and your payment will be $1,500.00 per month. You are so excited you begin looking at $180,000.00 homes.
You are so excited to be able to consider getting more bedrooms and bathrooms, a fireplace, and a garage, etc… Your emotions are swept away and you don’t even consider $1,500.00 per month is out of your “budget.” Hell, the banker told you that you could afford $1,500.00 per month. It doesn’t matter to you that $1,500.00 is damn near one entire paycheck, you are about to be a homeowner. First mistake.
Before you moved out of your childhood bedroom or parents basement you should have known how much comfort you felt not having bills and being able to live comfortably. And so because we are asking adults that are already saddled with mortgages, car notes, child care, student loans and tithes to budget it is really to late. There is nearly nothing left at the end of the month.
So what I am going to suggest now is not going to sit right with most of you. But I am going for it anyway. But first, let me say that my goal for writing this blog is to EMPOWER each of you to live a life that is in line with your finances and your values. So here we go. If your ends are meeting every month, ask yourself what bill are you paying that you regret? Once you figure it out GET RID OF IT! You have to get real and get real honest. If you bought too “much house.” It’s time to move. I had to do it. So, I know it’s not an easy decision. But we will discuss later the freedom in downsizing and living a life in accordance with your values not the values of others.
This brings me to the second reason why budgets don’t work
You are overspending
You can not live life in a fairy tale. You have to live a life in line with your reality. I will give you a personal example. I lived in a half million dollar home and owned two foreign luxury automobiles. My law practice paid me nicely. And whenever I felt a little uncomfortable financially, I would just find a way to earn more money (and so should you). As an overachiever this way the logical next step. I used to tell an ex-boyfriend that used to complain about the price of gas and food, to stop worrying about things you can’t control, just make more money. I still believe that.
However, this post is about expenses you can control. I was in complete control of how much house and car I bought AND how much house and car; I financed. I applied that same logic to my personal expenses. And let me tell you this. After 7-8 years of that kinda consistent pressure, I exploded. I earned a high income but how I spent my income was 10xs higher than I was making. I was over spender in every aspect of my “budget’.
Earning more money is necessary to my thought process. But controlling your spending is imperative to building wealth. But I digress. Overspending smashes a budget. After all, are you really going to pull out your budget every time you buy a dress or a sandwich? No? So you overspend because you forgot you only budgeted $50 this week while you’re at the bar after work ordering your second $15 martini. So, you have to live a life aligned with your income. And I do mean earned income, not the available credit on your credit card. It’s important for you to avoid overspending and spend within your finances you have to know how much you earn and how much you spend, on everything.
Blind man walking
As I mentioned earlier, my prospective clients cannot complete a budget worksheet because they have no idea what they spend. You have to stop making excuses for not dealing with your money. It’s not your husband’s responsibility nor your mother’s or sister’s. It is your money you earn and you have to learn to respect it and how to spend it. How? But being very clear where you spend your hard earned money.
Knowing when you are paid and how much you are paid is crucial. Are you paid bi-weekly or two times a month? How much is your paycheck to the penny? Most don’t know. But know this if you are self-employed or if you drive Uber there is no excuse. I’m self-employed but the Lawson Law Group writes me a paycheck every other week. For example, If you drive Uber you can view your deposits on a daily basis or weekly basis and know how much you earn by the amount of time that you drive. It’s a clear depiction of your income and time spent.
Next, track your expenses. Fixed expenses are easy. If your rent is $800.00 and car note $307.34 then the budget is easy. But what are your true spending habits? How often do you go to target, the dry cleaners, vet, out to dinner? Please sit down and look at your spending habits over a 30 day period. Preferably 60 days. How can you budget $XYZ amount for your dog when you have no idea how much or how often you buy his dog food or how much his shots are? You can’t. Or you will and then you will under budget and be pissed because your budget didn’t work.
Listen, you are in the driver’s seat and in control. It’s your money earned and your choices where it goes. Like the ex-boyfriend of mine complaining about the price of gas. We have no control over that type of thing. However, we can control if we buy a car, what kind of car, if the car is properly maintained, i.e., the air in the tires, where we drive, etc… You have ultimate control over your life and what you do with your money. Act like it! Know how much you earn and chose where you are spending it.
Budgets have a negative connotation.
I found one definition on dictionary.com that defined a budget as a restriction on expenditure. Naturally, they don’t work. Nobody wants to feel restricted every day of their life. This feeling of self-restriction is the same reason why budgets don’t work. We can not just tell ourselves “No” to every want repeatedly. We only have but so much personal willpower. Eventually, you will go back to pleasing yourself.
I know for me this was the case. Why would I tell myself no when I’ve worked so hard to tell myself yes. And now, it is too hard for me to retrain my brain. I can’t tell myself a budget isn’t a restriction and believe it so I call them a spending plan. How do I choose to spend the money I have worked hard to earn? Doesn’t that sound fun?! It is. It gives you the power to create the life of your dreams financed by you. Fix your mind up. And create a spending plan that works for you aligned with your values.
So to sum this up. I don’t like the word budget. Budgets usually don’t work because you haven’t trained your mind to live a life in alignment with your values and goals. You keep creating a budget and then failing at it because you haven’t taken the time to look at your money, your expenses and defined your life on your terms. Stop overspending and running from the facts about your finances. Even if you take my advice and earn more money, I want you to use the extra money to build the life of your dreams. Do not use the extra money as a down payment on a financed life of your dreams.
And for inspiration, if you want to take a page out of my book, now there is no reason for me to create a budget. I have little to no expenses. And my income far exceeds my expenses. I do not finance my wants. Either I can buy it or I don’t. Now I love lay-a-way. The travel group I use often gives payment plans. I do use that. If my coop has a special assessment financed at 0% or close to it, I accept that payment plan too. But in general, because I chose to simplify my life and live below my means it doesn’t become necessary for me to pay attention to my spending. I am no longer an over-spender. I spend in alignment with my values and goals. Which includes eating fresh organic food (expensive AF), staying active ( even though I put my health club membership on hold), spending time with my aging family and being my best self. I’ve learned that most of the best things I want in my life are free. The food isn’t. Neither are the trips to the gun range.
But, as you can see I no longer value a big house and fancy cars. Well, that’s not completely true. Put it this way. I no longer value putting unnecessary stress on me caused by financing a lifestyle that doesn’t feed my soul. And one last thing you should know my “spending plan” does include retirement and savings. And when I wanted to begin a new business I adjusted my spending plan to include the cost of my new business endeavor. Once I fixed my mind up, everything else followed.
Namaste,
Nicole G.