Back in 2018 (so long ago!) when I first started writing this blog, I wrote a post on budgeting. This was largely focused on the logistics or the how of budgeting, and didn't really touch on the emotional component to budgeting. Since budgeting has come up pretty frequently with my clients as of late, I decided it was a good time to revisit this topic.
I want to start by saying that I firmly believe that budgeting is essential to being in control of your finances. How you budget might look differently depending on who you are, but having some method of keeping track of what you spend is necessary in order to make conscious and intentional decisions about where your money goes. Everything that follows is based on that premise.
Money overall is often a very emotional topic for people. This is largely due to the society of the United States designating money and finances as a taboo subject for so long. When things are forbidden to talk about, they often become highly charged, especially when those things have such a high influence on how we operate. It's also emotional because many people don't have the adequate knowledge required to handle their money wisely. That lack of knowledge leads to self-recrimination, doubt, shame etc. There is an illogical expectation we place on ourselves that we should know how to use our money wisely even when we've never been taught how to do so. All of these churning emotions often come to a head when first learning how to budget.
The first emotional reaction I've noticed is a sense of restriction. For people who have been spending without any strict discipline, initially conforming to a budget can feel and be very difficult. It's like you're trying to fit what used to be an expansive world into small boxes that don't have much room. The sense of restriction may come from having to decide early on where your money is going, removing the sense of spontaneity. It can also come from the sheer amount of categories some budgets have, or from realizing that you will have to cut back in some areas.
This feeling is normal and it makes sense. Imagine the first time you try to eat better. You immediately start to cut back on all the things you've heard or assume are "bad," (you know, all the delicious things). You stop eating what you want to eat, and only eat the things you should eat. You go overboard to correct what has been an extravagance on the other end. Ultimately, it doesn't go well and you revert back to how you were eating before. The same thing is true for budgeting. It feels restrictive because people often overcorrect immediately. It's unsustainable to have such a dramatic shift in how you've been operating for so long.
But budgeting doesn't have to be restrictive. For first time budgeters, the byword to live by here is learning. You are embarking on a completely new way of doing something and you are not going to get it right immediately, and I didn't either. Free yourself of that expectation.
The first step in budgeting is just to understand what is happening. You shouldn't expect to make any major changes in your spending habits for at least the first 3-4 months of budgeting. In the beginning you are only focused on learning how you already spend your money. This isn't about restricting what you spend but learning how you spend. You cannot make sustainable changes to what you don't at least have a base-line understanding for. Honestly, you could replace the word "budgeting" with "tracking" for the first few months. That is all you are doing. Once you've learned how you spend your money, it is easier to pinpoint areas to cut back (if that is even needed) in ways that are sustainable and will impact your financial health overall. And remember, you are the person setting your budget. No one else is.
The second main emotional response to budgeting is shame and self-judgement. And just like the first emotional response, there is a byword for that: grace. Budgeting is very much like looking into a mirror for our financial life. To budget properly, you really need to get an understanding of your entire financial life, that way, you can realistically allocate what is available for necessities, and what is available for your enjoyment. Not many of us like hearing or learning about the ways we can improve. It's hard for many of us to hear critical (useful, not harmful) feedback at work, in our relationships, for our health etc. Our finances are no exception. Many people avoid ever dealing with their finances because they don't want to face the truth. Well, let me tell you something: the truth is freeing! Once you know it, you then have the opportunity to do something about it. If you don't know the truth, you can't make impactful change.
A healthy dose of grace is essential here. It is not surprising that you will want to judge yourself and become discouraged because of what you've done in the past. But you are not your past self! By taking this step toward budgeting, you are demonstrating a shift from how you used to be. I mentioned earlier that this is a learning period. I'm sure if you sit back and think of the things you do well now, you can remember when you didn't do them so well and had to learn them first. With budgeting, you are both unlearning some habits that may no longer serve you and learning new habits to propel you to where you want to be. Give yourself the grace (and time!) you need to accomplish that task.
Working on the right mindset as you approach budgeting is even more important than having the right tools to budget. If your mindset is off, your budgeting is off. If you are just starting to budget, or have been budgeting for a while, remember this is a consistent learning period because you and your financial goals will evolve. Give yourself grace while doing so. Also remember your motivations for taking this step in the first place. If your budget aligns with your values, you'll have a much easier time through this learning process. Once your mindset is right, this article can give you some ideas of which tools are available to you for budgeting.
Budgeting can be, and often is, an emotional experience for many of us. But those emotions don't always have to be negative. I experience real joy and excitement when I am budgeting and realize that I'll be able to accomplish a goal I've set for myself that month. I also feel content knowing that I can put more money into categories that mean a lot to me (restaurants and travel anyone?) because I know myself and how I spend. I encourage you to give budgeting a try so you can reap the same benefits. The beginning might be a bit rocky, but with some patience and practice, it will be smooth sailing straight to your healthier financial life.