Friday, May 22, 2015
Forbes worded it very well - see their "Why youre thinking about your budget all wrong" article
http://www.forbes.com/sites/maggiemcgrath/2015/05/22/why-youre-thinking-about-your-budget-all-wrong/
Tuesday, May 19, 2015
Why you should banish the boring from your budget
We've all inadvertently asked this question before - first, it's why can't I seem to save for that new pair of shoes? Then, it's why can't I treat myself to a fancy meal? Then, it's why shouldn't I have a new car? Why shouldn't I live somewhere nicer? Maybe a house?
This is the old - "if you give a mouse a cookie" - scenario. One thing seems "reasonable," then another, then another, until suddenly your savings have drifted away. Or the dial has stopped ticking up.
When I first graduated college, I was very careful to avoid this trap. I found the cheapest rent possible, kept up my old accord Betsy, kept haircuts to a minimum, only ate out on happy hour specials or the local deli's deal of the day, and the list goes on. As I watched my student debt go down, I wanted to give up on that diet and loosen the belt I had tightened around my financial waist.
Over time, I have found myself loosening that belt again and again. "What's the point of all this hard work if I can't enjoy it?" I find myself wondering. Each time I have reached a milestone, a different budget line item has gone up and sometimes multiple. Then suddenly, I'm not saving at all.
Each time I aim for a big goal - like paying off student debt or getting a promotion - I have a big beautiful picture of the future in front of me - something worth looking at and something to keep aiming for.
But when I reach that goal, I lose focus.
Not because I am bad at budgeting, am a wilder spender, or am a generous person giving it all away. Rather, when I plan for the one big goal, I don't properly plan for the next.
Here's my typical process: 1. What $ amount do I have now 2. What $ amount do I want to have/do 3. What day will I have it. 4. What other $ amounts do I want and what date do I want them.
Did you spot the theme? This process is numbers based. Dollars and dates. As a serial budgeter and numbers focused person, I don't consider my emotional state when I budget.
My friends that don't budget have deeper connections to the emotions involving money: "I don't understand what all those numbers mean, I just want to know that I will get what I want." "I dont want to feel like a cheapass." "I know what I should do but I just don't feel like it." "That stuff doesn't matter, experiences matter." "If I can make [insert emotion here] happen with a few dollars, I'll throw the money at it."
On the flip side, I ignore common sense for the sake of numbers (ask my boyfriend about the 8 hour layover in the "perfect travel plan" I created. Luckily, he booked the flights.)
As a result, I end up with a very boring budget. And when I reach a goal I completely lose focus and try to buy everything. Because there's an emotional being I have ignored during my laser-focus dollars and dates plan. And she really really wants to throw a party and invite all the friends to celebrate, literally and figuratively.
For this reason, I changed some categories in my budget to capture or generate emotion. It was harder than I thought it would be, but here's some samples:
Nutritious homecooked meals (instead of groceries)
Social exercise (exercise is free: I could do pushups and run outside, but if I pay for yoga it's because I want to be around people)
Environmentally friendly transportation (aka mass transit, which happens to be cheaper)
Spontaneous transportation (because being spontaneous requires getting places instantly-like Uber)
Unhealthy food (instead of dining out).
Future beautiful house (instead of savings)
Sticking it to the man (instead of paying off debt)
If you are new to budgeting, hate numbers, or can't stay focused, try making your categories more fun. Maybe you'll have "save the whales" instead of "charity", or "party house" instead of rent, but whatever you do, make it yours. And tell me what you think!
This is the old - "if you give a mouse a cookie" - scenario. One thing seems "reasonable," then another, then another, until suddenly your savings have drifted away. Or the dial has stopped ticking up.
When I first graduated college, I was very careful to avoid this trap. I found the cheapest rent possible, kept up my old accord Betsy, kept haircuts to a minimum, only ate out on happy hour specials or the local deli's deal of the day, and the list goes on. As I watched my student debt go down, I wanted to give up on that diet and loosen the belt I had tightened around my financial waist.
Over time, I have found myself loosening that belt again and again. "What's the point of all this hard work if I can't enjoy it?" I find myself wondering. Each time I have reached a milestone, a different budget line item has gone up and sometimes multiple. Then suddenly, I'm not saving at all.
Each time I aim for a big goal - like paying off student debt or getting a promotion - I have a big beautiful picture of the future in front of me - something worth looking at and something to keep aiming for.
But when I reach that goal, I lose focus.
Not because I am bad at budgeting, am a wilder spender, or am a generous person giving it all away. Rather, when I plan for the one big goal, I don't properly plan for the next.
Here's my typical process: 1. What $ amount do I have now 2. What $ amount do I want to have/do 3. What day will I have it. 4. What other $ amounts do I want and what date do I want them.
Did you spot the theme? This process is numbers based. Dollars and dates. As a serial budgeter and numbers focused person, I don't consider my emotional state when I budget.
My friends that don't budget have deeper connections to the emotions involving money: "I don't understand what all those numbers mean, I just want to know that I will get what I want." "I dont want to feel like a cheapass." "I know what I should do but I just don't feel like it." "That stuff doesn't matter, experiences matter." "If I can make [insert emotion here] happen with a few dollars, I'll throw the money at it."
On the flip side, I ignore common sense for the sake of numbers (ask my boyfriend about the 8 hour layover in the "perfect travel plan" I created. Luckily, he booked the flights.)
As a result, I end up with a very boring budget. And when I reach a goal I completely lose focus and try to buy everything. Because there's an emotional being I have ignored during my laser-focus dollars and dates plan. And she really really wants to throw a party and invite all the friends to celebrate, literally and figuratively.
For this reason, I changed some categories in my budget to capture or generate emotion. It was harder than I thought it would be, but here's some samples:
Nutritious homecooked meals (instead of groceries)
Social exercise (exercise is free: I could do pushups and run outside, but if I pay for yoga it's because I want to be around people)
Environmentally friendly transportation (aka mass transit, which happens to be cheaper)
Spontaneous transportation (because being spontaneous requires getting places instantly-like Uber)
Unhealthy food (instead of dining out).
Future beautiful house (instead of savings)
Sticking it to the man (instead of paying off debt)
If you are new to budgeting, hate numbers, or can't stay focused, try making your categories more fun. Maybe you'll have "save the whales" instead of "charity", or "party house" instead of rent, but whatever you do, make it yours. And tell me what you think!
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