The "B" Word, Ep #30-One For The Money

The perspective on budgets

Not long ago, I read my boys the classic Treasure Island by Robert Louis Stevenson. The book tells the story of a few men and their mutinous crew sailing from England to Treasure Island on a ship called the Hispaniola. This large ship could not have made such an impressive journey without the aid of a small rudder to steer. As a certified financial planner, I see a parallel between a rudder steering a ship and a budget steering someone into a better financial future. Without a rudder or a budget, we would never reach where we want to go.

Many people view budgets as a financial straightjacket, sucking the joy out of life. Some view it as a diet for money or a middle seat on a long flight, unpleasant but necessary. Regardless of your view, budgets are essential, and we must see budgeting in a better light. One way to do that is to use a different term: spending plan.

Planning for your lifestyle

Spending plans, or budgets, aren’t designed to deny you lattes or your Amazon Prime subscription. Instead, they are a way to plan a satisfying lifestyle for both now and in the future. When I work with clients, I advocate for two people: the client’s present self and the client’s future self. I want both people to have wonderful and fulfilling lives, and a spending plan can make that possible.

Spending plans also ensure you’re making the most of your financial opportunities, maxing out retirement contributions, getting the highest rate on savings accounts, or reducing your insurance premiums. The plan also ensures you’re not wasting money on old gym memberships or streaming services that you no longer use or have forgotten. One study found that the average American spends $237/month for subscription services and that 84% of consumers underestimate how much they spend on these services each month.

How do you know your budget is working?

One way to tell if your budget is working is if you have revolving credit card debt that’s non-medically related. Reviewing your budget is imperative if you don’t have an emergency fund of at least three months worth of expenses and aren’t saving at least 10-15% for retirement. The necessity of addressing spending priorities applies especially to those who have credit card debt rolling over each month.

People with credit card debt are sadly living in a fantasy, without incomes to support their lifestyles. Plenty of credit card companies and auto dealerships are more than happy to charge Americans thousands of dollars in interest each year to help them believe in the fantasy of their unsustainable lifestyle. If your financial ship is sailing with a compromised rudder, you can end up in dangerous waters. Like a ship off course, you must make the corrections to get yourself back on the path. With an honest assessment of your spending and regular reviews of your spending plan, you can help ensure a bountiful future.