What Exactly Is Budgeting?

I’ve been in the business of helping people—women especially—change their money lives for some years now. The process of what I call “funancial” coaching looks a little like this:

1. Get everything on paper and make peace with it.
2. Figure out how current and comprehensive spending stacks up against income—this usually answers a lot of questions.
3. Evaluate financial priorities—get out of debt, save for a down payment, etc.—and map out a plan for achieving them.
4. Allocate existing money to current priorities that need to be met before you get new money, then repeat each time you get additional money. 
   

It’s this last step that we’ll focus on in this here blog post. Please note that as of yet, I have not said the word “budget.” But I just did, and I’m hoping you’ll still stick around. That “budget” word is a seriously distasteful word to so many people because of what it conveys—deprivation, boringness, frugality, the like. I hope that, by describing it below, you’ll be more inclined to give it a(nother) chance.

Who:

Budgeting is for everyone! Not just people with lots of money, or people with very little money. Could you use more peace in your life? A sense of control over something? Would you like to feel more empowered with your money and feel like you are making headway toward your financial goals? If you answered yes, budgeting is for you!

What:

What if budgeting simply meant planning money before you spend it? Best news ever—that is what it means. It is really that simple. And it was this understanding that I was totally missing out on in all of my 20s when I practiced short-sighted, reactive, theoretical “budgeting.”

It means adopting a system that allows you to organize your existing money, keep it organized, and then organize new money into the system. Zero-based budgeting is the sort of budgeting that changes lives because it gives every dollar a job and allows you to see very clearly that no dollar can have two jobs. 

This kind of budgeting is like putting the money in your accounts into piles with sticky notes describing what that money is for. And when you spend that money on that thing, you feel confident and empowered, knowing that you didn’t accidentally spend the money set aside for any other purpose. #bestfeelingever

There are apps for this, that do the digital equivalent of cash-envelopes or sticky notes on money. The one I use, love, recommend and teach is You Need A Budget. 

Where:

You can budget on your phone, a tablet, your laptop or desktop. You will budget on vacation, at work, at home, and on the go in your mental mullings. It’s not the sort of thing you have to sit down at your desk and hammer out.

When:

Budgeting is the sort of thing you do anytime you get money, and anytime you spend money. It’s the sort of thing you might touch (willingly, not out of compulsion) every couple days. 

It’s a contact sport, not a theoretical one. Real budgeting includes a lot of little check-ins, and adjusting for new information. It’s saying things like “I allocated $60 of my current money for the Do Some Good category, but something unusual came up and I’m choosing to overspend that category and take it from the Entertainment category.” See how you adjust on the fly? No more hoping that your financial plan made on the 1st plays out and, if it doesn’t, you end up even deeper in the debt hole.

Why:

My favorite one. You budget to take care of your hard-earned dollars and to become debt-free and to purchase your first home and to go on vacations and to have the luxuries and possibilities you want in your life. You budget to be able to be generous without spending your kids’ college tuition or the mortgage payment for next month. You budget to give yourself options and to sleep more peacefully at night. 

As I typed the above, I couldn’t help but think of an invitation to a party where you always include who, what, where, when, and why. Like I probably did on the invites I likely sent to my twin best friends inviting them to my 10th birthday party which took place on Friday the 13th. A black cat literally crossed our path, the truck ran out of gas, they didn’t like what we had for dinner and then got paint from my new paint-by-number set on my new swimming suit. It was rough. But that is not what’s in store for you with budgeting! 

An invitation to budget—or budget differently or anew—is an invitation to the party of your life. Having your money—no matter how much of it you have—organized in an actual, breathing, zero-based budget gives you options to maximize your life and have peace along the way. So please come to the party. There’s no black cat going to run across your path letting you know it’s a bad idea:-)