A few years ago just before my wedding, I was in a local department store shopping for things to furnish my first home and spotted some unfolded towels on the floor. At first glance, I noticed they didn’t look like any other towels on the shelf so I picked them up to reveal beautiful white towels with a Mr. and Mrs. Embroidered in silver thread – this would fit perfectly with my color scheme! However, I noticed no price tag and a small flaw on one of the towels. I took the towel set to the register to discover that they were the only available set in the store. The gentleman at the register informed me that the towels would be $80. When I offered $15, his reaction of disbelief was more than clear. I simply replied, “Well, no one else is going to buy those towels and I’m willing to pay you at least something.” Fast forward to today, those towels still look great hanging in my bathroom, and each time I look at them, I smile inside at this small, seemingly insignificant victory of paying only $15!
As a financial professional, it isn’t easy to view the world apart from dollar signs - even when I’m away from the office. When it comes to the B word, (Budget – there I said it) viewing the world through money goggles isn’t such a bad thing. Sure, it takes time and dedication to keep accurate records. But over the long-run, people who use a budget as a proactive tool to shape their spending habits tend to feel more confident about their path to financial success.
The point here isn’t to tell folks to use budgets: most of us probably already know that we should, whether we actually do or not. What I’m suggesting is to use a budget in a different way than you may have in the past. Most people use their budget as something to reference, like a historical record. For instance, they might check back to the previous month or year to see how much they spent on “entertainment” or “medical care.” While this is certainly a viable use for the tool, I would submit that a budget can be even more valuable as a proactive guide for future spending decisions.
For example, each month, I have a certain amount of dollars allotted to dining out. If I consistently update my spending log, I am able to make financially informed decisions. When Saturday night rolls around, I can check to see how much of my budget is remaining for the month and then make a choice about dinner, be it a night out at Bin 54 or settling for Chick-fil-a! But I’m not making my dinner choice and then later realizing that it wasn’t really in my budget.
On a larger scale, perhaps some of us can relate to buying a car or booking a vacation and then recording it on our budget sheet after the fact, only to realize it caused more of a crunch in our cash flow than we had anticipated. A proactive budget sheet can help you avoid mishaps of overspending or spending in areas that aren’t ultimately as important to you.
Needing a budget plan has nothing to do with how much income you do or don’t have coming in the door. Regardless of your circumstances, it is prudent to have a proactive plan in place for dollars allotted to spending. So go ahead, embrace the B word. You will hopefully find that you have a better, more informed way of viewing everyday spending choices.