If you are a frequent reader, you know I think budgets are important.
Budgeting is critical for us to understand our spending habits. A budget helps us target unnecessary spending. If you are trying to pay off your student loans, creating a budget is essential.
The first step in any financial planning is to look at what money is coming in and what money is going out. When you look at what you earn and spend each month, patterns begin to emerge. For example, you may think spending five dollars on the occasional cup of coffee isn’t a lot of money. Those purchases can add up, though.
In light of my strict budgeting views, it may seem surprising that I think budgeting for fun is a necessity. However, fun is a critical component in any well-thought-out plan.
Budgeting Goals Must Be Attainable
At the beginning of the month, you create a bare-bones budget to limit your spending to just the necessities. You plan to use the remainder of your money to pay down your debt. This plan has you feeling pretty good about yourself. You may stick with this budget for the first week or two. If you are disciplined, you may even stick with this plan for a month or two.
Eventually, however, it catches up to you. Maybe you are sick of Ramen Noodles, perhaps 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 you don’t incorporate them into your budget, your budget will fail.
The key is to cut yourself some slack. This slack comes in the form of money that can be spent guilt-free. At the beginning of the month, decide how much money you are comfortable budgeting for guilt-free spending. It could be as little as $20. I use $50. As the month progresses, that extra money can pay for a take-out meal when cooking at home sounds exhausting. It can be a bottle of wine or a movie. That money can be spent on any luxury or impulse purchase. It is the opportunity to have the fun that a strict budget would never allow.
If you try to maintain 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 unsustainable budget or just give up on budgeting altogether? 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 helps us sustain our budget long-term.
If you are like me, you feel guilty about your spending from time to time. On the one hand, this can be a positive sign. It means the budget is important to us, and we are mindful of it in our daily lives. It means that we are working hard towards freedom from our debt. On the other hand, this can be a negative. We can’t feel bad about enjoying life. Prioritizing financial responsibility 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. 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 you cannot afford the things you genuinely need or creditors are constantly calling you, your finances are ruling your life. This is what you want to avoid.
If you go too far to the other extreme, however, you have the same problem. Pinching every single penny may get you a nice number in your bank account, but its no way to live your life.
Find your happy medium. Budget for some fun and create a budget that works for you.
Do you budget for fun? How do you treat yourself each month for sticking to your budget?