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Head to any personal finance blog or forum, and you’re likely to discover that one of the first things you’ll be told to do is keep a budget.
Now, if you’re up to your ears in debt and struggling to pay your bills on time, the benefits of creating a budget are obvious (though likely also depressing!) But what if you’re earning enough to coast by? Why should you keep a budget then?
Truthfully, you don’t have to keep a budget, and a lot of people don’t.
But, in a capitalist society, money represents both time and power. Every pound you earn is a piece of your life that you have traded away for a token that you can spend on things that are important to you.
If we don’t pay attention to our money, we can wind up frittering it away on things that are easy and convenient in the moment, but don’t represent what we truly value.
The importance of setting goals
In our life, there are things we have to do and things we can choose. We have to make sure we meet our basic survival needs, and those of our dependents. At a minimum, we need food, shelter and clothing.
But, beyond that, we have choices. Maybe your home is important to you, and you want to make it a sanctuary. Or perhaps travel is something that energises and excites you, and you want to go on long holidays to far off places. What if you’re a petrol head, and want two or three cars to tinker with? Or maybe you value getting time to spend on your hobbies, and want to work less hours or retire early to focus on your own personal projects.
Maybe you feel passionately about a cause and want your time on this planet to matter. You want to leave a legacy. Or maybe you want to dedicate your time to your loved ones.
The chances are high that you cannot afford to do all of these things. So the question becomes: what matters to you, and how can you afford it?
Adulting is about making choices with intention
It is my firm believe that when we talk about ‘adulting’ we aren’t only discussing how to clean an oven or how to move house. We’re really discussing living with intention. As a child, your life is controlled by others: parents, teachers, etc. You have little choice over what you do or where you go. The process of growing up is learning who you are, what you want, and how to get it.
Enter the budget.
A budget is a tool. It’s not there to shout at you when you spend £400 on lattes. You, as a grown up person earning your own money, can spend money however you want. If you love lattes and get a buzz from going to the coffee shop? Spend that money with my blessing.
However, many of us probably buy lattes in a thoughtless, automatic way, and would actually rather spend that £400 on a holiday, or an improvement to our home, or giving our children an unforgettable experience, or a couple of months of private therapy to work on some issues that we struggle with.
A budget asks and answers difficult questions
What kind of a person am I? What things do I value? How do I want to live my life?
When you start making a budget, you’ll begin with your monthly income. This is a finite amount. Unless you’re a billionaire or a trust fund kid (in which case, actually, you probably don’t need a budget) you need to make choices about what you want to spend your money on.
For starters, you probably have some fixed costs, like fuel to get you to work, your monthly utility bills, your rent, a minimum amount of food. But then if you’re lucky you have some money left over, and you start facing choices.
- A bigger home or an annual vacation?
- A big Christmas blow-out or a weekly takeaway?
- Adult education courses or a fancy wine subscription?
- High-end clothes or a high-end car?
- Charity donations or local organic food?
- A flashy wedding or a deposit on a house?
There are no right or wrong answers here. It’s unique to you, your situation, and what you want. You are in charge of your money.
A budget helps us face and plan for reality
Big goals often have big costs. Many of us dream of things like going back to school for a different degree, or perhaps of taking a year out to travel. And many of us want to do things like reduce our working hours to spend time with family.
As long as we just dream about it, we don’t have to face the reality of making it happen. We say ‘maybe one day’ and move on.
But if something is genuinely important to you, maybe you sacrifice some other things to make it happen. What happens when you actually sit down and calculate what your take home pay would be if you only worked a 4 day week? What happens if you sit down and look at tuition costs and how you might be able to afford it if you saved for a year first?
A budget frees us from endless ‘what if’ questions. By running the numbers you can instantly see if something is or isn’t possible. And maybe it isn’t possible. That’s okay! Let go of that dream, and find a new one that is possible.
How to make and keep a budget
There are lots of different ways to keep a budget, from a manual spreadsheet to a fancy program like YNAB. It can take some trial and error before you find a way that works for you (we all have different brains!) but its worth sticking with it.
I’ve been keeping a strict budget that tracks every penny for three years now (after a few years of trying different methods) and I can’t imagine living without it. It helps me know exactly where I stand, which helps me make the best possible decisions for myself.
Do you budget? What’s your process? What tools do you use? Drop a comment below and let us know!