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I am working on revamping the Amell Financial Series and it is taking a little longer than expected. I recognize that my detail-oriented self can get carried away and I run into the TLDR (too long, didn’t read) problem with my posts. I want to help people and share exciting things with people, but posts that are too long may not be helpful. However I didn’t think this post could wait until I was finished revamping the series. So, let’s get to the nitty gritty of understanding what budgeting actually is, why you need to create one, and how you can start this new year off on a good financial foot.
Budgeting Actually Gives You More Financial Freedom
How can discipline actually give you more freedom? Well, when you sit down and create a budget where you know exactly how much you have to spend on certain items within a week, month or year, you can then spend money on whatever you want within that allotted amount. By staying within this budgeted amount, you are not going to feel the negative consequences of overspending because you budgeted for the spending. Now I also feel obligated to encourage you to spend wisely and purchase items you need over items you want and also let you know that you do not need to spend all the money in your budget. You can save the extra money month over month to increase funds in a specific budget category or to put the extra funds into paying yourself!
If you are feeling financial stress after Christmas this could be because you spent money you didn’t actually have. If this is the case then you may now be putting yourself in debt and have to pay back more than you have borrowed on your credit cards. The Amell Financial Series can give you helpful strategies and concepts to help you fix this during the year and give you strategies to plan for next Christmas.
Budgeting Can Allow You To Retire Early
This is a huge statement! With discipline and applying the concept of paying yourself first, you can retire at an earlier age than planned. People are working well into their 70’s and 80’s and even 90’s because they cannot afford to retire. When you are specifically planning for your retirement and ensuring you are paying yourself first, then you will have more money for your future, retirement, and perhaps even intergenerational wealth! How cool would that be! Budgeting allows you to accomplish more than if you are just living without a financial plan.
Budgeting can teach you the discipline to live a good life now and still live a good live in retirement. Understanding how budgets actually work will allow you to pay for the things you need to in order to live now and to retire. Retirement planning will show you the funds you need to set aside now to continue living the way you do now while in retirement! When you make a plan and set goals, you have a purpose and direction and know what you need to do in order to achieve these goals. When you keep your goals in mind then when you willpower wanes you can remind yourself why you are practicing living a disciplined life.
Budgeting Can Ensure You Do Not Get Into Bad Debt
Debt is not all bad. Good debt can actually be a good thing, but we discuss this concept in the Advanced Series of the Amell Financial Series. Bad debt is not good! Bad debt comes from consumerism, overspending, and not budgeting. It needs to be paid off and avoided. Bad debt does not come from using a credit card wisely and it doesn’t mean never using a credit card. Bad debt comes from overspending and living beyond your means. Budgeting will ensure that you have good habits when it comes to using a credit card so you do not get into bad debt. Good financial habits are paying off your credit card as soon as you use it because you have budgeted for the spending on the credit card and have the funds set aside to pay it off completely. These budgeted categories can include grocery shopping, Christmas shopping, buying new clothes, a vacation, and more!
If you are overspending and incurring bad debt, this is a problem and needs to be curbed. If this is happening consistently, then you are probably not living the life you want due to the added stress of debt and out-of-control finances. You will need to learn how you can restructure your budget to afford that life. The Budgeting section of the Amell Financial Series goes into more depth for how you can create a budget, restructure your budget, add more income, eliminate expenses, analyze your budget and more!
Budgeting Can Make You Happier
Bad debt and out-of-control finances can lead to stress and a negative association with money. I used to despise talking about money and it took a while to realize that it was because I didn’t understand my finances. I didn’t budget properly or understand the purpose of budgeting. I didn’t know how money worked and I did not realize that I could actually control my finances. I didn’t like money because I thought I would be living pay check to pay check my entire life so I lived for now and what made me happy now. (Spoiler Alert: that lead to a lot of debt and did not actually make me happy!)
You do not need to have a bad relationship with your finances. The more you know about money, your finances, and the business cycle, the more you can improve your relationship with your finances and put yourself into a better financial position. Budgeting can take the stress out of finances by giving you a boundary to live within. However you live within that boundary is your choice! Budgeting can take the stress out of grocery shopping, unexpected expenses, Christmas shopping, household repairs, and more. When you budget for your life then you can live a happy life within these boundaries you set for yourself.
Budgeting Can Give You the Life You Want
Budgeting will allow you to live a life that you want to live within a boundary. Paying yourself first can lead to getting to live a life you want, with wider boundaries, at a later date. What does this mean? Well, by sacrificing now through living within a tight budget, you can put more money away for later. Learning to live within this tight budget can be uncomfortable in the beginning, but you can thrive within it! Learn to maximize a smaller grocery budget or clothing budget so you can pay yourself more money. Stick with this budget and you will create great financial habits that you can reap the benefits of at a later date. The benefits could be retiring early or if you decide to retire at the age you planned, it could mean having a higher budget allowance at that time.
Budgeting doesn’t mean always living within a tight budget either. If you have planned within your budget to pay yourself first and also to spend a certain amount for all the categories you need in order to live and you have planned for retirement and can sustain this within retirement, then you do not need to have a “tight” budget. The purpose of budgeting is to actually form a plan for now and later.
Living the life we want doesn’t mean spending extravagantly, but it does mean having the ability and skill to create a budget that gives you the freedom to spend as you wish within that allotted amount. If you want a bigger clothing budget, then you will know what you need to do in order to increase the amount in that budget category. You get to create the life you want through budgeting!
What Budgeting Actually Is
Budgeting is learning to live the life you want while having a realistic outlook on the life you can afford to live right now. When you learn to allot funds for your actual typical spending habits, you leave yourself in a positive financial situation by not overspending. Budgeting needs to take into account your actual spending habits and not the spending habits you wish you had. Budgeting is taking your real financial picture and combining it with a realistic version of the life you want to live while also planning for your future and financial goals for your future.
Budgeting isn’t always about eliminating expenses that are “unnecessary” but allotting for the spending you typically do. So, you enjoy getting your hair and nails done? You like to go to a restaurant each week? Budgeting doesn’t mean eliminating that spending and spending less. It means accounting for this within your budget! It means listing the things you want to spend money on and accounting for this within your budget!
If these budgeting concepts sound like great strategies and concepts you want to learn more about, then check out the Amell Financial Series. The Amell Financial Series was created to ensure our children had a written record of the financial concepts we are teaching them so they can practice proper financial habits, have the proper financial knowledge they need to plan their current finances, while also planning for their future goals, and learn how they can set up intergenerational wealth for their children, grandchildren, etc.
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