Making a budget is key to improving your finances—but there are limitations to what a budget does and doesn’t teach you. I will discuss what a budget teaches, its limitations, and how to address these limitations to make your budget concrete and sustainable.
What A Budget Does Teach You
Discipline
One of the biggest benefits of a budget is that it teaches you to be disciplined with your money. Making and sticking to a budget forces you to live within your means, which requires a lot of discipline. It takes discipline to acknowledge that your income is the limit of what you should spend, and to live within those limits. It takes self-restraint to avoid buying impulse purchases, and even more self-control to wait until you save for the purchase, rather than buy it on credit.
Priorities
A budget encourages you to establish your priorities. If you are to stick within your budget, you can’t buy everything you want—you have to prioritize: needs over wants, and loves over likes. A budget teaches you to prioritize financial goals and make decisions based on those goals. You learn to sacrifice things you like now for what you really want in the future. Budgets show the plan for where your money needs to go. But even budgets have their limitations.
What A Budget Doesn’t Teach You
While budgeting teaches discipline, priorities, and getting used to delayed gratification, there are limits to what a budget can do.
Budgeting Money
We need to realize that saving and spending are the two components that make up budgeting—you can’t focus on one without the other. Money being spent is not being saved, and vice versa. This means that every dollar has two purposes—it can either be spent or it can be saved. Each and every decision we make with our money is a trade-off.
We are easily caught up in the idea that ‘we can have it all’ when it comes to money. We don’t want to be restricted—we don’t want to be forced to choose between the Swig drink in the morning and the sandwich at lunch so we just buy both. But think of it in terms of cash. If you have a $10 bill in your hand, that bill can only be used for the Swig drink or the sandwich. If you buy the drink and want the sandwich, you have to take another $10 bill out of your wallet because the first one was already spent. We forget this when we use a card instead of cash. We become disillusioned that we can have it all; but we have to make a choice.
Spending And Saving: A Symbiotic Relationship
While the argument is logical, this mindset can easily turn into focusing on what we don’t have or didn’t buy. Yes, it is a trade-off and a choice—but saving and spending in a budget is a symbiotic relationship, meaning they exist together and benefit you. The money you spend to get something you really want should be worth the money you have to save later on, and the money you forgo spending in an effort to saved will be saved for a bigger purchase later down the line. You benefit by spending and saving in a different way; and you get to choose which you want most.
Why Budgeting Is Important
Despite its limitations, a budget is a necessary part of your plan for success with your finances. When you pick a budget method, you learn to delay the things you want in the moment for things you really want in the future. We need to understand that a budget is a framework—parameters in which you need to stay within in order to stick to your short-term and long-term objections.
Instead of thinking of a budget as a rigid set of rules that are restricting, think of it this way- following a budget means giving yourself options for the future—a life free of debt, working as long as you want instead of as long as you have to. When followed correctly, a budget gets you what you really want, not just what you crave in the moment. A budget gets you what you want, and when followed correctly, it gets you what you truly want both now and in the future. Next step- choosing the right budget method for you.
