Day 14: What is your Budget Trying To Tell You?
by Edward Smith
19 Jul 2020
What If I Spend More Than I Make?
In my last article entitled 🤠How to Create a Budget that You Can Live With and Live Within, I went over how to make a budget. You did it and came up short. Your expenses were more then your income. You're in the negative. Now what?
Congratulations! Your budget just saved you! Go back to your budget and see if everything that you're spending money on is actually necessary. You might find that you eat out too much, or that you pay too much for luxury items and experiences.
Budgets are great at keeping you honest and out of trouble.
Budgets also help you figure out what really matters, and they give you a chance to make choices between different things. They help you to identify places where you could do something different. Your original plan might be flawed and might require a second look. Keep tweaking and adjusting things until everything looks the way you want.
If it doesn't work, you might need to do something drastic. You might need to do something crazy like get a second job to keep paying for everything. We all want the cool stuff, but let's face it. That doesn't sound like fun to me. Maybe your budget is trying to tell you something deep. Revisit your budget. You might be wrong and you might need to look at things differently.
Take another look. You might be living too large. The kid you, didn't need a Lexus or Tesla. You turned out okay. Try scaling things back. A smaller you might be a happier you. Remove some things, see what happens.
If you don't get that latte every week, will you die? Life is about making choices. Budgets help you to see the big picture. You're now the General. You're able to see the entire battlefield, with all of the pieces set out for display. You get to look at everything from up high and come up with a winning strategy! Go get them tiger!
What If I Make More Then I Spend?
I have a maintenance fund for all of my house incidentals. I know the air conditioner is over nine years old, and the thing is going to break down. I don't want to treat it like an emergency on the day of, with no money in the bank. So instead of waiting until it becomes an emergency I save up the money ahead of time and use it when I have to. Crisis averted. I'm glad I planned ahead.
I do the same thing with vacation trips, anniversary trips, and cat medical bills. By saving up ahead of time I give myself breathing room, which is awesome, because breathing room lets me do other things that I would have seen as risky. I know that if things don't work out as expected I have a safety net that protects me and keeps me from becoming exposed.
That's how I ended up in a situation where I pay extra money towards my house mortgage every month.
We knew that we would be okay if we just paid what the mortgage statement told us to pay, but we also knew that doing it that way would be financially stupid in the long run. The funds helped us do something about it. Since we had our funds in play, to cover all of the important unexpected stuff, we were covered, so it meant we could pay extra towards our mortgage.
That's really cool, because when we pay more on our mortgage, it's like we're buying part of our life back from the mortgage company. Budgets tell you when you're okay to do new stuff that you don't normally do. You also know when it is time to stop. Budgets can work like a faucet. You get to control when things go on and when things go off.
Conclusion
In my house we use a budget. It's thanks to the budget, that we knew we could pay extra on our mortgage without creating a problem.
Paying extra for things that eventually go away can be smart, because when you can do that, you're slowly working to get that thing removed from your life forever. I love my house, but I don't love paying for it. At some point it would be nice to stop and use that money in some other way. The budget shows me how to do that.
By eliminating our mortgage quickly, the money becomes our money instead of the bank's money. Don't believe me? I can see it every time I calculate my net worth. Every dollar of extra, that I pay past my obligation, increases my net worth by the same amount instantly.
When I do that, I'm not paying, I'm saving. At some point, these house payments will be completely gone. At that point, I won't have any debt. I mean nothing. No car notes, no pay day loans, no house mortgage. Zero. Whatever I make, minus the stuff I have to pay for each month, will be whatever I keep. That money will be mine. I'll get to call the shots. I'll be the boss. I'll be my own master.
Sounds pretty cool to me. Why not do it yourself? You know you can. Create a budget. See what happens. You might be surprised. I know it works. Do it today!
Budgets remind me that my challenge matters. I need every available dollar to do it's job, and the best way to do that, is to keep myself in check and to stay within the limits of my budget. Budgets tell me and my money what to do and how to behave.
I don't hate my budget. My budget is watching out for me. It's got my back. It tells me the scoop, and it never stops working for me. That's why I owe it respect. Do yourself a favor. Learn from my experience. Create a budget. Stick to your budget. Respect yourself, and respect the process.
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