1) Reduces Stress; Eliminates fights, guilt, and shame
Money continues to be a top cause of stress for Americans.
According to a survey released by the American Psychological Association, 72% of Americans reported feeling stressed about money at least some of the time during the past month. 22% said that they experienced extreme stress about money during the past month. For the majority of Americans (64 percent), money is a somewhat or very significant source of stress, but especially for parents and younger adults.
What’s even more concerning is our “don’t-look-at-money-or-talk-about-it-because-we-don’t-want-to-seem-greedy” approach to resolving conflict. When it comes to personal finance, what you don’t know WILL hurt you!
Creating a monthly budget is a no-holds-barred checkup. It doesn’t allow us to keep hiding. It forces us to communicate, even with ourselves. All of our needs, wants, and desires are laid out on the table. We are no longer repairing our life; we are preparing our life.
I think the biggest benefit in creating and following a budget is the fact that it reduces our stress by giving us a plan. Plans that will give us hope regardless of our current situation.
It’s no wonder so many people are constantly “unlucky”. They are one mistake or deviation from perfect away from a mental institute. I would be stressed all the time too! But this doesn’t have to be a normal part of your life. Constant fights or feelings of guilt, shame and fear regarding money are all preventable! You can be weird if you want.
Financial margin is the best safety net money can buy. Emergencies are a part of life. Your car is going to need repairs. You are going to get sick. If these events induce stress then CHANGE SOMETHING. These non-life threatening events should be a nonissue financially. Just pay the bill! But the only way to “just pay the bill” is if you have built adequate financial margin. The only way to build margin is to create and follow a budget, regardless of your income!
A budget is put into place for the times when we have to spend money, such as a flat tire. When a situation arises that once caused psychosis, you can have the peace of mind knowing you are prepared for such events.
A budget is also put in place for the times when we want to spend money. It puts us in a position to truly enjoy what we truly enjoy. There is no guilt. There is no fear that you made the wrong decision. It was in the budget because it was important to you!
A budget gives you a basic template to make decisions. There is no need to get stressed because you already know the answer.
Is it in the budget? Is it in the budget that fits within our current lifestyle? Is it in the budget that fits within our current lifestyle that fits within our values? Is it in the budget that fits within our current lifestyle that fits within our values that one day will decide our legacy?
You don’t have to constantly be stressed about your financial condition. It’s up to you.
“Pain is inevitable, but suffering is optional”
A written budget empowers you. It forces you to take care of you! No one else is going to help you meet your goals. In fact, people will actually distract you from your goals. Even friends and family, although they don’t realize it! That’s why you need a plan. A plan that you write for your life!
Too many people lose hope and never get it back, especially financially. They’re too busy borrowing money to keep up with the Joneses. And then they get too busy working a job they hate, but can’t quit, because they have to repay money AND keep up the Joneses.
Right about the time they realize their broke, they figure out the Joneses are broke too!
It’s a vicious cycle. So they work like a dog, don’t enjoy life, and only tread water. Nothing is more demoralizing than never making progress. But nothing is more satisfying than making spiritual, physical and financial progress.
Progress leads to positive emotions. Positive emotions lead to satisfaction. Satisfaction leads to contentment. Contentment leads to motivation. Motivation leads to more progress. And back around we go.
A budget is a powerful keystone habit. Taking control of your finances, following a written plan, and looking beyond the present moment not only has a positive impact on your finances, it transcends itself into other, nonrelated areas of your life.
For example, creating a monthly budget gives us a snapshot of our current situation and, more importantly, the steps needed to achieve a better, more fulfilling life. In other words, it empowers you to live whatever kind of life you desire.
Imagine going to work every day because, if you didn’t, you wouldn’t have enough money to pay your rent. Would you enjoy it? No! You’re just working for the man.
Now imagine going to work every day to the same job but knowing that specific day is a tiny component that gets us closer and closer to a much larger goal. Would you enjoy it? You’re much more likely to because the man is working for you!
The small habit of creating a monthly budget somehow makes you a better employee, which gives you a better job, which gives you better compensation, which gives you more opportunities, and so on.
We can think of many different examples that illustrate this point.
Merely thinking of your finances is not enough. Mentally tracking your goals and the detailed steps to reach them is not an option, despite your awe-inspiring intelligence. This may make you feel empowered, but feelings don’t increase our actual influence.
Watching an inspiring movie might make us feel empowered, but if we don’t initiate actual change we are no more empowered than if we were watching Bambi. Creating and following a budget allows you to be empowered. It’s a simple way to initiate daily productive change that ultimately surpasses personal finance.
3) Brings Awareness
Would you like an increase in pay for doing no extra work? Would you like to stumble upon a pile of cash that you didn’t even know you had to take that vacation you always wanted? This is essentially what happens when you create a budget! You find money! You find money because you’re finally aware of where your money is going!
A budget gives you awareness. That’s it. After that, it’s up to you to ultimately decide what you do with your money.
A dangerous misconception people have is that they can aimlessly wonder through their life without a plan for their money. “I know what I spend my money on”, they say. “I keep track in my head.”
I can guarantee you one thing within the first three months of creating and following a budget: you will be amazed at what you spend your money on!
Just because I think you should live on a budget doesn’t mean I want you to be cheap. I want you to spend money! I just want you to spend money on things you actually enjoy. Some expenses are mandatory. But other expenses are just silly.
This is where you get your raise! You start eliminating expenses that don’t fulfill your life. You get money for not doing those things that you wish you were not doing in the first place. Those of which “just happened” as you wondered through life. It’s a win-win!
As a personal example, Megan and I decided to cancel our cable subscription and switch to streaming devices (Netflix and Hulu+). Cable and online streaming both have their pros and cons, but I won’t get into that other than to say streaming is much cheaper than cable. Did we forego cable simply because of its cost? No. I asked my wife if we could make the switch as my Christmas gift because I truly did not want cable! How did I know that? Our budget! It helped us rank our priorities based on short and long-term goals – not ranked by money! And cable did not make the list. In fact, it distracted us from our goals!
A budget is a mirror reflecting who we truly are. It opens our eyes to the life we’re currently living and how to get closer to the life we want to live in the future. What’s important to you? I should be able to look at your monthly expenses and, without knowing anything else about you, visually see what’s important to you.
Some people might say their church is important to them. That’s a very noble thing to say. But there seems to be one problem. By objectively looking into their expenses, it looks like (as an example) restaurants are more important than their church! They like McDonalds, Outback, and some yogurt shop more than their church! There are plenty of people that spend $1,000 a month on food, say their church is important to them, but yet fail to tithe even $200 a year!
Can you spend $1,000 a month on eating out? Sure, if you want to! Just don’t be ignorant enough to say other things are more important when they are clearly not.
What’s even more troubling is that many people don’t even know what they are spending their money on. They just thought it was normal to go out to eat every Friday and Saturday night, with a few Tuesdays, Wednesdays, and Thursdays sprinkled in “on their way home from work”. That’s what they see on Facebook – pictures of their broke friends!
I don’t care what you do with your money! I just don’t want you to waste it! I don’t want you to be ignorant. I want you to be aware, using a budget as a tool!