海角大神

Jenny writes in with an interesting question that was originally in this morning鈥檚 mailbag, but my answer became long enough that I decided to make it into its own post:

I went through all of the budget exercises in the and created a budget for myself. The only problem is that when I was done and I tried to follow it, it felt really restrictive. I stuck to it for a few months, but it was just miserable. I didn鈥檛 like how some set of rules told me how I could spend my money.

I guess I don鈥檛 understand how people make budgeting work. How did you do it?

First of all, you鈥檙e living by a lot of financial rules by simply existing in our current economy. If you have a job, bring home some pay, and keep yourself from being in too much debt, you鈥檙e already playing with a mountain of rules. You鈥檙e already making a lot of hard choices about what to buy simply by existing.

Every single one of us would behave differently if money were no object. If money were no object, I鈥檇 start construction on my dream house tomorrow, but I can鈥檛 because money is a concern. I can鈥檛 have everything that I want right now.

Thus, we prioritize. We choose to buy some things now and hold off on other things. This is the normal course of life. We can鈥檛 have everything, so we have to choose.

All a budget does is make you sit back and think about those choices. Without budgeting, we largely make those choices on instinct or on some vague idea of where we鈥檙e headed.

A budget means that you鈥檝e sat back, thought about your choices outside of the temptations of the moment, and chosen a different path. That path depends wholly on what you want from your life and from your future.

Does it mean you give up some freedom of choice in the moment? It sure can, depending on how exactly you budget things.

The question really is how much is that freedom of choice in the moment worth? Is the ability to buy a latte whenever you feel like it worth giving up a steady path toward your financial goals?

I don鈥檛 think there鈥檚 a single correct answer to that question. For me, I鈥檝e lived on both sides of that coin and I鈥檝e found I prefer living a life that鈥檚 headed toward financial goals rather than a life of increased instant gratification.

Everyone is wired differently, and because of that, everyone should budget differently. An approach that might work for you, Jenny, is to automate saving for your goals. Simply make sure that you鈥檝e got separate accounts for the goals you have for the future and set up automatic transfers from your checking into those accounts.

Then, for a while, use just your debit card for impulsive purchases. You can have just as much freedom as you always had at that point, as you鈥檙e still bumping up against the real limit of the balance of your checking account.

Yes, you won鈥檛 have as much money for free spending as you once had, but you鈥檒l have the feeling that your money is going somewhere productive and that you鈥檙e building a better future for yourself. In the end, that鈥檚 the real goal of the budgeting process.