I think it is a common misconception that budgets are restrictive and limit how you can spend your money. In fact, I believe the opposite is true. A budget can open up new opportunities and freedom in your finances. That has been our experience. Yes, at times it has really sucked and we did feel restricted. But the restriction was only temporary.
A big part of why a budget feels so restrictive at first is because it is forcing a lifestyle change, or at minimum, a rearrangement. It’s like going on a diet. At first, it sucks. You naturally want to eat everything and are drawn to all the food that will get in the way of your goals. For me, I always want chocolate, chips, ice cream, and any sort of snacky food. Oh, and I always want more.
But after a few weeks, or maybe a few months, you settle into a pattern and your intense cravings subside as your body gets used to your new lifestyle choices. There might be a few exceptions here and there, but otherwise, you can pretty easily maintain the changes.
The same is true for budgeting. I created a budget, but I still wanted to go out to eat, to grab drinks with friends, and spend money having fun! In other words, I didn’t really want to change my lifestyle. I was drawn to those things and felt really discontent that my budget wouldn’t let me do what I wanted.
I still get those feelings from time to time, but my mindset has adjusted to my new lifestyle and I don’t feel very restricted at all. Instead, I feel freedom and excitement with my budget. I believe a primary purpose of creating a budget is to identify where you are spending money and to help you learn to spend your money more efficiently, aligned with your priorities.
I’m in Control of My Money, Not the Other Way Around
One thing I have learned over the years is that having a budget allows me to tell my money where to go. After we figured out how we were actually spending our money, our budget became a list of priorities. We spent money on what was important to us, and we still do. Of course we need to eat, so we buy food, and we have other household bills like a mortgage, utilities, and all that jazz.
But we predetermine how much we spend on our flexible categories like food, gas, entertainment, and how much we allot to pay off debt. Really, anything extra goes to our debt, but we can always add more to any category along the way. If we need more food like we did this week, we buy more food, but we also readjust and spend less somewhere else to make room for the extra spending. It’s a really flexible system once you get your budget set up, and it’s this flexibility that brings freedom to your budget, instead of restrictions.
We have done a few small things to create space and make our budget more flexible.
Track Every Dollar
First, we account for every single dollar we make and spend each month. We also keep track of how much we spend in each category of our budget. It’s called a “zero dollar” annual budget. If you’ve ever read anything by Dave Ramsey, you have probably heard of it. The idea is to have zero dollars left at the end of the month. Now that doesn’t mean I need to spend my surplus money to make sure my income and expenses equals zero.
When we have extra money left after paying all of our bills, we get to decide what to do with the surplus to make our budget equal zero. Right now it goes to pay off student loans, but next month it will start going to savings and investments, among other things.
Create Extra and Miscellaneous Categories in the Budget
Over the years, our budget has transformed and evolved. In the beginning we had very basic categories and made less money. Now that we make a little more money, we added more categories to our budget. First, we added a personal allowance for each of us. It started at $25 and we later bumped it up to $50. This is money we can spend guilt free on whatever we want, and don’t need to check in with each other.
Any other purchase and dollar spent is mutually decided on and planned in advance. Second, we added a category for “date nights.” It’s only $50 a month, but it lets us be more spontaneous and free on our weekly date night. It allows us to go to a cheap movie or go out for dessert. We also have a “giving” section for practical giving we want to do above and beyond our monthly tithe (for more on why we tithe).
It lets us bless our friends, family, and sometimes even random strangers. Lastly, we have a “household” category. Our household section covers any basic needs for our house, like toilet paper, cleaning supplies, soaps, and really any miscellaneous expenses that make sense to put here. It is really vague, which creates extra flexibility.
Our Most Basic Question: Which Category of the Budget is This Coming Out Of?
Just last week we were driving home from work talking about our budget because we are nerds, and because talking about money is super important. Anyway, we were talking about something we needed to buy that didn’t exactly fit into any specific category. As a result, it brought up the question, “which section of the budget is this coming out of?”
A couple years ago, the answer would have been “none, because we don’t have any wiggle room,” but like I mentioned, we created extra categories for exactly this reason. If we go out to eat with friends, the money can come out of our date fund, our personal funds, or if we decide to treat our friends, it can come out of our giving category. One expense, with multiple options to pay for it. It has become a wonderful solution to random expenses that creep up from time to time. Now I’m sure this isn’t the only way to handle miscellaneous expenses, but this has really worked great for us.
Wrapping It Up
Budgeting isn’t scary and doesn’t need to be restrictive. It can actually create freedom and flexibility, and yes even joy in your finances.
Let Me Know in the Comments
What words describe your budget? How do you make room for extra expenses?