I am a big advocate of budgeting. Whether you make $2,500 per month or $25,000 per month, budgeting is the blueprint for how your money will outlast your month. Few people would ever build a building without a plan or blueprint (see Luke 14:28-30). Yet countless people try to steward their finances without a balanced budget. I am convinced that spending less than you make for a really long time is one of the keys to creating substantial wealth. Budgeting helps accomplish this.
I think this result is merely a side benefit that stems from the primary purpose of budgeting. So what is the primary purpose? The primary purpose is NOT to cramp your lifestyle, or to help you track your expenses, or even to create awareness around your spending habits—although some of these elements are included. The primary purpose of a budget is to get you to intentionally control and change your behavior.
Without careful planning, the natural inclination is to spend a little bit more than you make. If you don’t believe me, consider what you did with your most recent raise. If you didn’t make a plan for that increase, it has been spent month after month and you likely have little to show for it. A budget helps give that money an intentional purpose aligned with your goals and beliefs.
Budgeting is really a very simple task. However, when I ask new clients for their monthly budget what I typically receive is a list of:
- their income
- their recurring expenses (mortgage, electric, water, insurance, phones, car, etc.) with approximate costs, and
- a big “everything else” category.
This is not really a budget—this is an accounting of money spent, and a pretty poor one at that, I might add.
To budget, there are really only three things you need to do:
1) assign jobs to your dollars (mortgage, entertainment, groceries, etc.)
2) track monies spent
3) stop spending when the category is empty
If this is your first crack at budgeting, you may have to alter your categories a bit during the month, but that’s really it. Now, like with all plans, the key is in commitment and execution—so stick with it!
Now, I’d like to briefly address the small percentage of you who’ve been able to live below your means without a budget. This was me. Yes, I admit it, I’m a recovering miser. What budgeting has done for me is provide freedom to spend money without guilt. If there’s money left in the eat-out budget, then let’s go out! It’s also been good for my marriage in helping us steward our resources together and with a common goal. Finally, it has led to a more generous lifestyle because we are able budget in a “blessing account” for blessing others.
If you are not currently budgeting, I would strongly encourage you to give it a try. Feel free to ask questions or share your budgeting successes below.
