"These people who are always briskly doing something and as busy as waltzing mice, they have little, sharp, staccato ideas, such as: 'I see where I can make an annual cut of $3.47 in my meat budget.' But they have no slow, big ideas."
- Brenda Ueland
Budgeting ought to be about very big ideas, yet somehow we have managed to trivialize the budgeting process and transmogrify it into various pedantic exercises. Budgeting has taken on such negative connotations that it is no wonder that one third of people don't budget at all and two thirds say they are unsuccessful at budgeting. For many people, budgeting has become merely:
- An exercise in arithmetic. "If the numbers all add up, then I've really accomplished something."
- An exercise in irrelevance. "I made up a budget once. I never did understand it. It was just a bunch of numbers. It never did anything for me."
- An exercise in technology. "I learned how to use all the features in Quicken or Money, so I guess I have a pretty good budget."
- An exercise in statistics. "If my spending conforms to what other people spend on average, then I must be doing OK."
- An exercise in fantasy. "I construct the budget I would like to follow, but it bears no resemblance to reality."
- An exercise in guilt. "I'm always over budget. I feel terrible. If only I didn't have a budget, I would feel better."
- An exercise in magic. "I thought creating a budget would magically make all my debt disappear and I would be on the road to riches."
- An exercise in power. "I will make make other members of my household conform to my spending plans!"
- An exercise in negativity. "I can never do anything or have any fun because of my stupid budget."
In order to avoid these traps, try to start with the big picture in mind before you begin to work on your household budget. DON'T start with the average housing or grocery bill in the country. Instead, ask yourself big-picture questions such as the following:
- When I look back at age 70, what would I like my life to look like?
- When was I the most happy in my life? Why?
- If this morning I was diagnosed with a terminal illness, what would I do during the next 6 months?
- Am I satisfied with my contribution to the planet?
- What do I regret NOT having done in life?
Unfortunately, while the average person may see the value in asking such questions from time to time, they probably think that such "heavy" questions have nothing to do with budgeting.
But the reality of achieving lifelong objectives is that the big picture needs to permeate everything in your life - including budgeting. With any endeavor, the first question you want to ask is: What is my objective? Budgeting is a tool that can help you accomplish your objectives, but how can you properly construct your budget if you don't know what your objectives are?
And pushing it further: Why limit your objectives to this year's income statement? I suppose you could read Dickens to "learn the street names in London", or you could listen to Beethoven to "hear what a violin sounds like", but how foolish it would be to stop at that point! In the same way, why use a budget merely to make ends meet or to save some money?
It is often said that money cannot buy happiness. Fair enough. However, we usually recognize that money can to a large extent be traded for time and vice versa. We also often define money as a store of value. Budgeting, being a tool to manage money, can therefore be extended to help manage those most precious of commodities - time and values. And if economics can be defined as "the allocation of scarce resources among competing ends", then I contend that the household budget is nothing but economics in action at that level. Budgeting is all about choices, and you are the decider!
When people find out that we have a formal household budget, they often ask why we bother. Surprisingly to many people, the real reason we have a budget is not to save money or to provide discipline (although it probably does both of those things). We formally budget our financial resources in order to make sure that our finances are aligned with the big picture of what my spouse and I are attempting to accomplish with our lives.
Are you doing the same?