Why You Shouldn’t Use a Budget
Wait, what? No budget? Are you thinking, how can a financial advisor and prosperity expert be saying I shouldn’t budget? Here’s why … budgets don’t work – at least not for most people. They feel restrictive and are just not any fun – like eating celery at a pizza party. I’m not saying you shouldn’t know where your money is going or that you shouldn’t be paying attention to where you spend your money.
Reviewing where your cash is going and planning how you’ll spend in the future is really important – but even people who meticulously keep track of their spending have most likely skipped asking themselves the most important question in the process: Am I spending on what is truly important to me? Instead of trying to budget, I suggest you set up a values-based spending plan.
Look at the money you do spend and confirming it is in line with your priorities and values are powerful steps toward using your money to help turn your vision into reality. Most people spend unconsciously and then wonder why they aren’t moving toward their goals more quickly.
In most cases, people haven’t taken the time to look at and examine what they value in life. Yet, knowing what you want from life and creating a spending plan based upon these values, makes it possible to realize your goals more effortlessly.
Developing a values-based spending plan is helpful not only in reaching your financial goals, but also in creating a financial life that runs in concert to what is truly important to you.
THREE STEPS TO CREATING A VALUES-BASED SPENDING PLAN:
1. Step One
Set aside Quiet time to think and Journal about each of the following Aspects of your life: Family, Community, Personal growth, Spirituality, and Health.
For each category write about all of the things that are important to you. When you think you are finished, write some more. Once you have thoroughly explored each of these areas, go back and identify the most important points you have written in each section. Now go back over your list again and prioritize each of these important areas.
2. Step Two
Know what is Flowing in and Flowing out. For Some People this is Easy. They keep Track of their
Income and spending on a regular basis and can access this information quickly. For others (a.k.a. most people) coming up with a summary of their income and spending is more of a challenge. To compile this information, review the past twelve months’ spending to summarize your expenses into detailed categories using your check registers and credit card statements for the last year. The more detailed you are, the more useful the information will be in the values-based spending process.
Using a budgeting software package to assist you will help organize the categories and calculate the totals. Many people like using Mint.com or Quicken™ to automate this process. Once you have a listing of your spending for the past year, you are ready to begin assessing if you are allocating your money in ways that are truly important to you.
3. Step Three
Review your Expenses and see if your Spending corresponds with your Goals.
Now that you have a spending summary showing what’s flowing in and what’s flowing out, it’s time to turn this into a prioritized, values-based spending plan. To do this, go through each area where you spend and decide if it’s an A, B, or C priority. A values-based spending plan reflects what you really care about in life. It is a great way to proactively look how your money reflects your values and can help propel you to your goals more quickly. Wouldn’t you rather plan your spending than budget anyway?