If you are a frequent reader, you know how important I think budgets are. The first step in any financial planning is taking a look at what money you have coming in and what money goes out.
Budgeting is critical for us to understand our spending habits. You may think five or even 20 dollars here and there is not that much, but when you look at what you spend each month, patterns emerge. A budget helps us target unnecessary spending. If you are trying to pay off your student loans, creating a budget is essential.
In light of my strict budgeting views, it may seem a surprise that I think budgeting some frivolous spending is a necessity. However, a budget for fun is a key component in any well thought out plan.
Budgeting Goals Must Be Attainable
At the beginning of any month, it is easy to create a bare-bones budget and say I will spend exactly X dollars. You know that the remainder of your money can be used to pay down your debt, and you feel pretty good about yourself. You may even stick with this budget for the first week or two of the month. If you are really ambitious, you may even stick with your bare-bones budget for a month or two.
Eventually, it catches up to you. Maybe you are sick of Ramen Noodles, maybe you miss your social life, or maybe you want to run the AC a little cooler in the summer months. These weaknesses are a part of human nature. If we don’t incorporate them into our budget, our budget will fail.
The key is to cut yourself some slack. At the beginning of the month, decide how much money you are comfortable with adding to the budget. It could be as little as $20. I use $50. As the month progresses, that extra money can pay for a nicer meal when cooking at home just won’t do. It can be a couple of drinks at the bar with friends or a trip to the movies. It is the opportunity to have fun that a strict budget would never allow.
If you try to keep a super strict budget, odds are you will fail. You may keep it going for a while, but it will eventually fail. The question then becomes, do you go back to your budget, or does the budgeting stop? A not quite bare-bones budget is way better than an abandoned budget. Having some money set aside for fun allows our goals to be more attainable, and it helps us continue budgeting year after year.
If you are like me, from time to time you feel guilty about your spending. On the one hand, this is a very good thing. It means the budget is important to us and that we are keeping it in mind. It means that we are working hard towards freedom from our debt. On the other hand, this is bad thing. We can’t feel bad about enjoying life. Paying off student loans is important, but so is not being miserable.
If you set aside some money each month to spend on whatever you want, you won’t have to feel guilty when you spend it. Reserve the guilt for fighting the impulse to buy a new car or other large unnecessary purchase. Make your budget a healthy habit, not a source of self-loathing.
Reward Yourself for Keeping Your Budget
My favorite part of the fun budget is successfully reaching the end of the month without spending it. At that point, I feel like I am playing with house money. I can roll it over to next month, or I can splurge on something I don’t need. It is the treat I give myself for sticking to my budget.
That little carrot at the end of the stick can be a great motivator. If we stay motivated, we stick to the budget. If we stick to the budget, our bills get paid, and debt becomes part of the past.
The Final Thought
I have always seen financial planning as a means to an end. I get one life, and I want to enjoy every moment of it.
If my creditors are constantly calling or I am unable to afford the things I really need, my finances are ruling my life. This is what I want to avoid.
If you go too far to the other extreme, you have the same problem. Pinching every single penny may get you a nice number in your bank account, but its no way to spend your life.
Find your happy medium. Budget for some fun and create a budget that works.
Do you budget for fun? How do you treat yourself each month for sticking to your budget?