For most people, it’s understood that you should have a budget. It’s like exercising or eating vegetables; it’s something everyone out of college feels they should do. But most people don’t, and I think it’s because they tend to fall into one of two categories. On the one hand, you’ve got the people who naturally make more than they spend; they’ve got money in their account at the end of the month, every month, so why worry about it? On the other, you’ve got the people who naturally spend more than they make; they’re going to have a balance on their credit card at the end of the month, every month…so why worry about it?
I totally get that. But it’s missing the big picture. And to understand the big picture, we need to understand something about money.
What is money? Forget Webster for a moment. Really, what is it? I like to think of it as “potential”. Potential for what, you ask? Potential for anything. Money can be converted into virtually any service, any item. It’s like a machine for converting the time you spend at your job into…well, anything at all. Each month — or every two weeks, or every time you close a sale, or every hour you work with a client — you get some of that potential. At that point, it’s entirely up to you to determine what you do with that potential, each and every dollar of it.
Do you start to see what I’m talking about?
Managing your finances isn’t some kind of pass/fail test, where the object of the game is to spend less than you make. That’s definitely very important, to be sure, but that’s not the point. The point is to manage your potential to its fullest — to put each minute of your time, each dollar of your money, to its best possible use. (And I’ll be the first to say that sometimes a Freebird’s burrito is its best possible use!)
And if that’s the point, then budgeting becomes the most obvious tool to get there. A budget tells you exactly what your priorities are, in numerical form; if you’d rather spend your money on X than on Y, then clearly X is more important, isn’t it?
In other words, budgeting means looking yourself in the eye and making a choice, rather than letting someone else — advertisers, peer pressure, and the various external forces that clamor for our time and money — choose for you. Is it harder than sticking your head in the sand and just hoping things will be okay? You bet.
But in my experience, it’s this kind of awareness that makes life worth living.