For many South Africans, budgeting is nothing more than a painful, penny-pinching process that sucks the joy out of life. Over and above the hard facts often revealed at the bottom of the balance-sheet, most of us are left, post-budgeting, swamped by a flood of negative emotions which include frustration, guilt, envy, anger, shame, disappointment and despair. Little wonder that, despite involving the simplest of mathematical equations, the personal budget has become procrastination’s dearest friend.
Possibly the leading reason why we as humans avoid budgeting is because budgeting per se has very little to do with maths. Budgeting is in fact a deep personal experience during which we discover the difference between what we want now and what we want most. And therein lies the secret to managing one’s money: budgeting starts with a personal determination of the prize. The end goal. The dream. The very thing we want more than anything else. It involves a deliberate, personal decision to sacrifice what we merely like for something that we truly love. It’s a conscious decision to forego instant gratification in purposeful pursuit of true personal satisfaction. You see, without an end goal or a prize, the very existence of a budget is secondary, for in the words of the Cheshire Cat in Alice in Wonderland, “If you don’t know where you’re going, any road will get you there.”
Preparing a budget places one in the position of master over both one’s money and financial destiny. More than merely mathematical, it involves an important psychological shift – from being slave to one’s creditors to being manager of one’s hard-earned money. Simply put, a budget involves telling your money what to do so you don’t end up wondering where it went.
Whether your prize is overseas travel, a comfortable retirement, tertiary education for your children or the purchase of a sports car, the very existence of a pre-determined goal can have an enormous impact on one’s spending behaviour. It’s common cause that, in the absence of a budget, consumer spending is nothing more than erratic, whimsical and emotionally driven. In fact research shows that, if consumer spending isn’t controlled by a personal budget, their spending generally falls into one of the four following categories:
- Habitual spending: Purchasing that mandatory café latte every morning from your favourite coffee shop because you don’t feel you can start the day without it.
- Bargain hunting: The ill-conceived belief that one can save money by actually spending.
- Impulse shopping: The heady, short-lived rush that some people experience by buying on impulse.
- Retail therapy: Obtaining emotional satisfaction from the very act of shopping.
When it comes to personal money habits, there’s an apt adage that seems most applicable: “If you keep doing what you’ve always done, you’ll keep getting what you’ve always got.” In the absence of personal financial goals, the regrettable reality is that our spending habits will probably remain wanton and directionless – with overspending, debt and anxiety being the obvious (and consistent) results. Identifying the prize and putting a workable budget in place to achieve it, means embarking on a deliberate plan to ensure a different (and better) outcome.
Knowing your own personal prize and having a budget to achieve it means one can take pleasure spending one’s money on purpose – sans guilt, regret or anxiety. Far from being a dreary tool in an age of austerity, a budget has the power to re-position you as the driver of your financial destiny. It is a mechanism that re-directs one’s focus from how much you have, to how much you can do with what you have. In its simplest form, budgeting determines the difference between how much you earn and how much you spend. True wealth is what you deliberately decide to do with the difference.
Spend wisely and have a blessed day.