What if I told you that budgets actually create freedom instead of leaving you restricted? Would you believe me?
You see budgets aren’t meant to suck the fun out of spending. They’re actually meant to help you spend more.
No really. They help you spend more in the long run because they help you keep more. And by keeping more, you get to spend more later on.
All a budget really is, is just a plan that allows you to spend better. That’s all.
The word budget has such a negative connotation to it. People hate them. They think restriction. They think overbearing. It makes us feel trapped. Or at least, that’s how it seems.
We need to stop thinking about budgets like a nazi boss telling us what we can and can’t do. Instead, we need to think of it like a game plan for getting the most out of our money.
Here are 5 ways that these game plans can actually create more freedom.
1. Budgets Give You Control
By making a game plan for where you want your money to go, it helps give you more control over your life.
Let’s say you’re going to budget on a monthly basis and that after taxes are withheld, your take home pay every month is $3,000. So before you do anything with that money you would make a plan for how you would like to spend it.
You decide before you spend the money, what you want to spend it on. So maybe you have $800 on rent, $100 on Utilities, and $150 for cell phone, Internet, and Netflix. That leaves you $1,950 left. Next you can decide how much you want to spend on groceries.
Are you the type of person who’s going to spend $600 a month because you only eat super healthy organic food? Or maybe you’re on the other end of the spectrum and load up on ramen and spaghetti to get by only spending $150 for the month.
Either way, you’re in control.
How much do you want to spend on going out with friends? What about buying new video games, movies, books, or clothes? Do you work out at home, or will you get a gym membership?
These are the types of questions you can ask when you’re making a gameplan (shh… it’s really just a budget!)
By making a plan at the beginning, you have more control to make sure you actually buy what you want. If you don’t make a plan you’ll end up spending all your money in the moment and probably regret it later.
The reason you don’t go buy groceries when you’re starving is the same reason you shouldn’t make a plan on how to spend your money while you’re at the mall. It just doesn’t work. When you’re already out, you’re in a mood that’s ready to spend. If you haven’t already decided what you’re going to buy, you’re probably going to end up buying a bunch of stuff you don’t need. And honestly, stuff you probably don’t really want anyways.
When you choose where to spend your money before it’s spent, it gives you control to buy what you actually want.
2. Budgets Bring You Peace of Mind
Quick, how much money is in your checking account?
Odds are, you don’t know.
Most people don’t. Most people just spend money without any sort of plan. But you don’t know whether or not you can really afford something when you don’t make a plan. And that’s stressful. And if you don’t have a plan or know what’s in your checking account, you’re in for a world of trouble.
The number 3 New Years Resolution of 2015 was to spend less and save more. But considering the fact that credit card debt continues to rise, how many people do you think actually stuck to that resolution?
One of the reasons they probably didn’t stick to it is because they didn’t put a solid plan in place.
Here’s the thing, though. If you make a plan and stick to it, all that worry about money can go away.
For instance, ask me how much money is in my checking account.
You: Nick, how much money is in your checking account?
Me: I don’t know.
You: What? I thought you weren’t stressed about money? How can you not know what’s in your account and not be stressed about money?
Me: I made a plan (budget) on where to spend my money that’s based on my income. My Quicken App on my phone keeps me up to date with what I’ve spent so far this month. I know that if I stick to my plan, I’m good. And my bills are automated, so I don’t worry about what the number in my account is from day to day.
See how that works? Once I made a plan, I don’t have to worry about money. It brings me peace of mind because I just stick to the plan.
3. Budgets Give You More Time
Besides being able to gain more control over your money and hopefully save more, the biggest reason to do a budget is to save you time. When you create a game plan that you can stick to it opens up more time in your schedule because you’re not stuck worrying about your money.
Budgets create so much freedom because they free up your brain to focus on other things.
The only thing you cannot get more of is time.
We can’t get any more time than we already have, so we need to try and do everything we can to maximize the time we’re given.
When you’re stressed, even subconsciously, it takes away from the cognitive centers in your brain. Basically, stress takes away from your ability to produce quick and clear thinking. In turn, this makes you less productive and costs you more time when doing things.
By creating a budget, you free up your brain to stop worrying so much about money and start focusing on stuff that really matters.
4. Budgets Create Breathing Room In Marriages
Unfortunately, money issues are one of the leading causes of divorce. As we said above, the majority of people stress about money. And inside a marriage, if two people aren’t on the same page about an already stressful topic, problems are bound to arise.
Fortunately, when you create a plan together for how the money should get spent, it can create a lot of space to breathe.
For example, my wife and I each budget an amount of spending money every month. At the beginning of every single month, we both get the exact same amount of what Ramit Sethi likes to call, Guilt-Free Spending Money.
This means that we don’t worry about what the other one will think when we’re buying from our “Guilt-Free Spending.” And we both get the same amount each month, so it’s totally fair.
Hanna likes to buy a lot of clothes while I really don’t care for clothes most of the time. I’d rather spend my money on gadgets, longboards, or computer apps. Instead of us fighting about what the other one bought we just use our spending money to get it.
And if we don’t have enough spending money left for that month to get what we want, we either just don’t get it or save spending money until we have enough to buy it. I use Quicken to track when we want to save spending money from one month to use it down the road. That helps us be able to save up for larger items that won’t fit into the monthly amount. For instance, right now I’m working on saving my spending money to get the Go Pro Hero 4!
Now, of course, we still budget for things like date nights, necessary clothes, shoes, and other things. But this guilt-free spending money gives us both the freedom to buy stuff we want without worrying what the other one will think.
This is absolutely huge for creating a plan that works inside of a marriage. If you’re married, I highly recommend giving this a shot. I think you’ll be surprised at the peace of mind it brings knowing you won’t have to explain why you bought that ridiculously overpriced pair of shoes when you already have 5 just like it.
5. Budgets Make You Extremely Effective
By having a budget that gives you control, brings peace of mind, frees up time, and creates breathing room, you’re able to become a much more effective person.
Money affects every single area of our lives. If you’re worrying about your debt or whether or not you’ve got enough money to pay for what you just bought it’s going to affect everything. You’ll be less productive at work. You’ll be unfocused when hanging out with friends and family. You won’t be able to stay focused on home projects or hobbies.
Budgets help take that all away. Creating a plan for your money gives you the freedom to focus on whatever it is you’re doing right then and there. You won’t have to be worrying about whether or not you can afford rent next week. It’s all already built into the plan.
It’s proven that money can be one of the most stressful things out there and everyone on this planet has to deal with it. So why not create a game plan that lets you become more effective in every area of your life?
If you’ve tried budgeting before you probably know how hard it is to stick to it. And there are lots of tools out there to help you stay on budget. But before you jump in, you’ve got to first understand why you want to budget. If you don’t get that straight, you’ll never stick to it.
So figure out what it is that makes you want to budget and then use that as motivation.
Do it for more time. Do it for more control. Do it for peace of mind.
Ultimately, start budgeting so that you can be free.
Let me know in the comments below what you think about budgets and if you plan to start one, why?