Boss Blog: January 25, 2017
Budgets Suck!!!!……Right??????
One of my all time favorite books is “The Wealthy Barber,” written by David Chilton. Much of what I base my practice on is written in that book. To me, it is the “holy grail” of common sense financial advice. Despite this, there are a few points within the book that I disagree with. My main objection comes with The Wealthy Barber’s views on budgets.
The author Chilton points out that a budget is not overly significant. He goes on to say that it does not matter if you budget as long as you follow certain simple rules, (ie. the 10% rule of savings). I disagree with Chilton in regards to budgeting for one simple reason. It is the budget that allows for everything else to occur. I will explain what I mean by this.
Most of us don’t have an unlimited income. Most of us need to live within our means. Wait a second that’s not true. EVERYONE needs to live within their means. That statement then begs the question: “What are my means?” You have to know what you make. That’s easy, right? Ask anyone what they make and they can tell you within 5 seconds. Even the panhandler on the corner knows his daily rate. So the next question is, what does it require to just get by? So we now know what we make and what we need to make to survive. That, my friends, is a budget. Simple isn’t it? Not so fast. Is it our goal in life to just get by, or do we want to get ahead? Do we want to accomplish all our goals and dreams, or is living week to week okay with us? Most people aren’t satisfied with just getting by. So I guess I should answer the question then, “Why is a budget important?”
Budgets are all about “Goals and Dreams.” It is our goal to pay our bills on time. Once we achieve that with ease we move to the next goal. It is our dream to own a home. Once we achieve that we move on to the next dream. How do we accomplish our amazing dreams when it is tough to take care of our modest goals? This is where the budget comes into play. Making sure you divide your funds properly is essential. The budget is what provides the structure to your spending.
When people think of a budget they think of constraint. They think of how I won’t be able to do what I want. “I am going to have to pinch every penny and live like a hermit.” Here is the brutal, honest, truth. If you don’t make much money then yes, that should be your life. It is the budget that shows you how broke or not you really are. If you make good money the question needs to be asked, “Why am I always broke?” If you are not always broke then you must ask yourself, “Am I maximizing my situation?” Oh god, so many questions……
These are all questions a budget answers. The budget is the base from which your money will grow. It is what clears the confusion with your financial situation. The budget should be the foundation of your financial plan and to it, you will add the bricks of prosperity. (Yes I just said bricks of prosperity). Look at your everyday life and you can see how important a budget is. The government releases a budget every year. All successful businesses have a budget. (The ones that fail probably didn’t). Even that panhandler we mentioned earlier knows what he needs to make every day. All these people have budgets and so should you.
Budgets are all about clarity. They provide strength for something that is important to all of us, our money. They are a tool in our financial tool belt that will allow us to move forward. I know I’m biased but I love my budget. My budget keeps me in line with my goals and dreams. It is rigid enough to keep me in check, yet flexible enough to allow for life’s never ending changes. Because of my budget, I can now pay myself first. Because of my budget, I can now pay myself back instead of paying the bank back. This all came from my budget and now the sky’s the limit.
I’m certain David Chilton didn’t mean to imply budgets were completely useless in his book, “The Wealthy Barber.” Here are a few questions you can ask yourself to see if a budget should be important to you:
1) Have I accomplished all my goals?
2) Do I honestly know where all money is going?
3) Am I truly saving as much as I could be?
If you answered “no” or “I’m not sure” to any of these questions then you need a budget. With personal debts levels rising at an alarming rate, having a budget is a no-brainer. Ask yourself this: Would any personal trainer say to you?… “So come to the gym when you feel like it. Also, try to eat right sometimes and you will definitely get fit.” I thought so. Budgets are for everyone so take the steps to get your money right. You will thank yourself later, believe me.
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Joseph James Francis is a Financial Advisor. You can find him on various social media platforms and at budgetboss.ca.