How Budgeting Can Change Your Life—A Real Story

My Story

When I first entered adulthood, all the way to the point of being married, I basically lived paycheck to paycheck. I did periodically save, but it was by accident. I especially spent more in times that I had a bigger social life.

The worst part was that I almost never had a budget during this period. There were times that I felt myself sweating bullets when I would see my bank balance go down. I had no idea how many of my debit card purchases had already gone through or what was actually pending. And of course sometimes I would overdraft and pay some unholy fees for a $2 coke.

The only way I would start to feel any peace is to create a budget. This would tell me I made enough money and that there was a clear plan on how not to run out of it. One of my problems was that my only goal was "just don't run out of money". I wasn't doing any favors for future me—he would have to take care of himself. After all, I was dreaming he would be making a lot more money anyway.

The problem was, I was never consistent about budgeting. After a week or two of feeling good, I'd stop paying attention and eventually go into freak out mode again. I eventually discovered working overtime. Overtime allowed me to aimlessly work more so that I could also aimlessly spend more. It also meant I was going out less I guess.

Fast forward several years and I was about to get married and buy a house. In order to qualify for a mortgage I needed to offload some debt. I sold my car at a $2,000 loss (my loan had a blanace higher than I could sell it for). I paid off a credit card and saved as much as I could for a decent honeymoon. In order to accomplish this feat I was working 20 hours of overtime per week on average.

Getting married really made me stop and think about how it wasn't just me anymore. I had to worry about someone else's well being too. All I could think about was the stress I saw in my sister's life during the 2008 Financial Crisis. A spouse losing a job and the working spouse suddently being financially responsible for everything. I was an electrcial contractor during the 2008 Financial Crisis and I also saw a lot of over levered investors go down during that time. I decided we would create a budget that was conservative enough to only require one of our jobs. As for the rest of the money—well, I hadn't really thought that far ahead yet. The important thing is that started to budget consistently.

For the most part we stuck to that plan, but eventually it was based on my earning, which was higher than my wife's. Later I heard about Dave Ramsey while talking to someone at a party (I go to some wild parties right?). Dave Ramsey hated debt, and frankly, so did I (even though I dabbled with it from time to time). My wife and I had student loans and an RV Motorhome we never used. Before I started dating my wife I used to think I'd like to live in an RV. It turns out I didn't. I sold the RV eventually (for yet another loss—the loan balance was higher than the sale price). We collectively decided to abolish debt with all of our leftover money. Over a couple of years it was all paid off. There's no way we would have been able to do what we did then without a budget.

Not long after, I started making what I felt like was "real money". I was working hard on building my career as a software developer. When I was at work and ran into something I didn't understand, I'd spend the evening at home learning all about it. Over the course of a year or two I made some serious progress and the company I worked for noticed. I remember distinctively when my salary increased to $80k/year. Our budget only required $32,000 take home dollars. It felt unreal. I couldn't believe anyone would pay me that amount of money. In fact, it felt so unreal that I was willing to bet it would be taken away from me eventually (hello scarcity mindset). The only solution was to start investing the excess dollars so that I wouldn't regret it later.

This is when budgeting became a way of life.

Why don't people like to budget

Ignorance Is Bliss (except it isn't).

Avoiding scary things sometimes feels better than acknowledging it. I can say from experience that the opposite is true. Avoiding a budget is just pushing those money stresses from the present and into the future.

Fear Of Missing Out (FOMO)

They feel like budgeting will restrict their life or hold them back from what other people are experiencing. This is more true today than ever. All the lavish cars, houses and vactations people post on social media can really sting. A budget, may sensibly push you away from some of those things.

A Budget Feels Restrictive

Jocko Willink, a retired U.S. Navy SEAL officer once said, "Discipline equals freedom". A little restriction is sometimes necessary for greater freedom.

Time and Effort

Keeping track of receipts comes to mind.

Modern budgeting apps track your bank and credit card transactions for you. This is sometiems the difference between a free and paid for budgeting app, but I think the cost is worth it. While it may make sense to enter these transactions at the time of purchase, it isn't necessarily required and I wouldn't let it be a barrier.

Old habits die hard and new habits come slowly

This is true, but not as true as you may think. I recently read in "The ONE Thing" by Gary Keller and Jay Papasan that it takes on average 66 days to start a new habit. Their suggestion is that you don't need to be well disciplined to achieve great things, you just need to start creating essential habits in your life. They also say that you should only focus on building one habit at a time.

Budgeting Helps You Spend with Intention

On one side of the coin, budgeting feels restrictive, but I argue the opposite. Ramit Sethi, an author, podcastor and entrepreneur wrote in his book "I will teach you to be rich, the following: "Spend extravagantly on the things you love, and cut costs mercilessly on the things you don't." Simply put, a budget allows you to prioritize the things that matter the most and it forces everything else to take a back seat. Intentional spending is just as important as intentional saving.

There are two things my wife and I love to do with our money.

1. Go on long trips
2. Invest in our financial independence— because that's the key to unlocking our future time.

Without a budget, I'd really struggle to make those things the priority they deserve to be. A budget doesn't restrict our lives, it enhances it by prioritizing what is most important. It brings about a certain financial awareness that I don't think you can get any other way.

Automate Your Savings and Financial Growth

I think we all know that saving, paying off debt or investing in our future are wise things. I really enjoy all those things, but I'm willing to bet that most people find them to be boring. Fair enough— let's automate boring things.

If you priorotize saving, paying off debt or investing in your budget, it becomes really easy to setup automatic saving, investing or debt pay off with your bank. That means you can start getting rich without even thinking about it.

(Stay tuned for future posts that cover saving, investing and debt pay off)

Budgeting Gives Peace of Mind and Reduces Financial Stress

Without a budget that highlights our goals and values, we can feel in the dark when it comes to our money. That usually means that there's a silent voice of worry in the back of our head wondering what's around the next corner. Sometimes that voice isn't so silent either.

Budgeting should be very mindful of your goals and concerns. That means you can start prioritizing finances around the things you care about most.

I used to worry about car repairs and overdraft fees. In fact I remember when I would get my car inspected and getting angry when something would fail. Now I'm thankful we found it ahead of time so that I know we can drive safely down the road. This is because car repairs is intentionally a line item in my budget. I don't care or worry when I need to fix something...okay it is annoying, but I don't worry about it.

Conclusion

Starting a budget is the beginning of financial peace for most people. Watch for future blog posts where we'll discuss specific ways to budget.