Should you have a budget? YES!!!!

“A rose by any other name…” - William Shakespeare

Oh man… the word that people don’t like to hear when it comes to money and that’s “Budget”. I was watching this video the other day and all I could do was shake my head. I mean, this is one of those times where “a rose by any other name” just makes total sense. Give it a watch if you got about 5 minutes and pay attention to the 3:40 mark.

Did you watch it? Did you notice something? She may not call it a budget, but “tracking my expenses daily” and having a set amount that goes to savings automatically is called budgeting. One of the things that this video seems to cover a BUNCH is the EMOTIONAL aspects that a budget seems to give. They talk about what makes you happy, making savings something you don’t even think about, and how not sticking to your budget makes you FEEL bad, but one would argue that this is the point of having a budget.

Now this topic between the emotional / mental side of money versus the mathematics of money is HUGE. I mean trying to get to my goals have been an emotional roller coaster as I look at my budget everyday. When things are good, then it feels like I’m coasting towards my goals and I couldn’t be happier. The day I got push out of my job for my single income family is the day where everything came to an ear-busting halt and I felt like the world was going to crush me, my wife, and my two kids. The feeling of vulnerability was just to intense and it was so easy to have my first instinct go to dip into your retirement / investments just because I was SOOOOO terrified by the situation. But this is a topic for a different time HAHA.

I’m a HUGE fan of Charlie Brown and I thought this was great. The reason is because as a kid I went to Korea to visit my grandmother and uncles for the first time in my life. Well as an American raised kid, I didn’t know ANY KOREAN, well not enough to hold a conversation. A problem a lot of 2nd generation has I think. Charlie Brown was the only American show I could find that would play in Korea and I would watch that all day everyday if there was nothing else to do. HAHA. So the purpose of learning from the pain of being stupid, is that you recognize where your pain point is and you need to learn from the past. Not to put you down, that’s why budgets should hurt a little.

Budgets SHOULD HURT if you overspend and SHOULD FEEL GREAT when you don’t reach your spending goal.

Let’s stop digressing and let me tell you why you should have a budget. My friends and I (we are all trying to reach the FI/RE GOAL in various areas of California) have had this conversation many times and we always seem to come to the same conclusion. A budget helps us control our spending (even if we go over) and helps us reach our financial goals.

Just in case you missed it: A budget helps us control our spending (even if we go over). We need to find a balance in life where we are happy with how things are and not spend a penny more. For example, do you really need to go to the restaurant with your friends and eat a full meal, or can you eat a little at home and go to the restaurant and spend on a side to hang out? Do you need to go to the movies and bar, or are board games and buying drinks at Costco good enough for a good time? Do I need this new game even though I didn’t finish the other one yet or can I maximize my utility from it by setting a challenge to myself (Looking at you Octopath Traveler and a never get a game over challenge)? You’ll be surprised to see how little you actually need to spend to have a good time with your friends or even alone LOL.

Most people have a hard time controlling how much they earn. I would assume that most of us have / had 9 - 5 jobs that paid hourly or a low / decent salary that doesn’t help us break 6 figures a year. However, having an income problem is something that you need to solve in the long term and working hard. But what you can control now is how much you spend which is the most important thing to reaching your goal. Here’s why: Once you hit a minimum life where you are happy and don’t NEED more, everything that you make above that can go into savings / retirement / paying off debt. The level of NEED can be different depending on the situation. Are you homeless? Then you need shelter. Are you hungry? then as Dave Ramsey would say “Beans and Rice, Rice and Beans” will fill you up, not tasty / fancy but at the very least you’re not hungry. My favorite one is “Do you really need your Starbucks? or can you make a 20 cent iced coffee” - Graham Stephan. Find a place with your income where you are happy with your life and don’t spend more than that.

This means that if you want to start heading towards your goals you need to make this “boring” thing. Some of my friends use Mint from Intuit. Dave Ramsey has his Every Dollar app. However, I use Numbers on Mac (Excel is fine for Windows) and made my own custom spread sheet because I like to have the control over all the equations and know EXACTLY where all of my money is going and how it’s calculated.

Just to wrap this up, the reason why you should have a budget is because you want to make sure to have some degree of control for your spending. Whether you’re super strict about it or not depends on a variety of things: are you just to broke to go over, do you just have MAJOR OCD if you do go over?. Plus it’s nice to have a reminder to control your spending in a certain area of your life. This is just such a WIN in your financial future that you can’t do without it. For me, I’m fortunate enough to have it as a guideline where I can have a little bit of wiggle room month-to-month, but I never go outside of it to an extreme.

- M