Nothing throws a bucket of cold water on a client meeting like a conversation about budgeting. Think about it: topics like investing, planning for retirement, buying a house, and saving for college all carry the bright promise of some future benefit…something to look forward to. But budgeting? Not so much.
“’Budget’ is a four-letter word,” quipped a long-time client when I recently introduced her to our new financial planning program, Wealth360°. What comes to your mind when you hear the word “budget?” Most of us think of restrictions. The knowledge that we’re “on a budget” nags at us like a subconscious spending party pooper. It makes us feel guilty for buying that new putter or handbag or for spending too much at Starbucks.
I’d like to suggest that we look at budgeting in a different way. The entire purpose of budgeting is to create self-awareness. What purchases and activities are valuable to you? Where are you actually spending your money? Is there a discrepancy between the two?
We should always aim to spend with purpose. Something that you view as an indulgence may be particularly important to someone else (think: spouses!) That morning trip to Starbucks may be costing you $60 a week, but if that ritual is valuable to you, then budget for it by eliminating some other expense that really doesn’t provide the same enjoyment.
I often find that when clients undertake the exercise of budgeting for the first time, they identify areas which represent a much larger percentage of their spending than they realized, and they find that they’re spending money on things that really don’t mean that much to them. Budgeting can also help you identify hidden problems, like that annual subscription to satellite radio for a car you no longer own.
Included in Wealth360° is a very powerful tracking and budgeting tool which helps clients see the details of their income and expenses. The program pulls your credit card and checking account transactions automatically every day, so all you have to do is categorize them. As a starting point, just try tracking your spending for one week. Don’t worry about going back and trying to pick up old transactions. Just start with today.
I promise you’ll become more aware of how you’re spending your money, and you’ll begin to make buying decisions based on your values. In other words, you’ll begin to spend with purpose! Isn’t that a better way to look at budgeting?
Photo: © 2013 Grumpy Cat TM