How to Make Budgeting Suck Way Less
Before you write this article off as just another bitter pill to swallow (because let’s be honest: the word “budgeting” in a headline isn’t exactly an endorphin creator) I have a confession to make: I’m a financial advisor. I run a business that has the word “budget” in the company name. And...I hate budgeting.
That’s because budgeting, in the traditional sense of the word, is not fun. For most people, it means a nightmarish spreadsheet of all your fixed expenses and then making some arbitrary guesses on how much you “should” be spending on food, shopping, travel, Uber/Lyft, etc. You tell yourself you’re only going to spend $200 on food and dutifully write down and track everything for a month (or maybe you get fancy and plug everything into Mint). But at the end of the month, you’ve blown it by $257, which makes you feel like a failure. And so you decide you must just not be good at this whole budgeting thing and give up.
Or perhaps you use a simplified budget approach, like the 50/30/20 rule, where 50% of your spending goes to needs, 30% goes to wants, and 20% goes to savings. Sounds pretty reasonable, right? But every city dweller--especially New Yorkers and San Franciscans--are laughing to keep from crying right now, because they just re-signed a lease on their apartment that costs one whole paycheck. Failure before you can even get started.
And therein lies the problem: When it comes to budgeting, there are no rules of thumbs and there are no magic formulas, which may sound scary or frustrating at first, because we all want to know if we’re doing it “right.” But here’s what’s exciting about it: If there are no rules, that means there’s no way to fail. There’s no way to be wrong.
Budgets are personal. Your budget should 100% line up to your values and not anyone else’s. One of the best pieces of insight I ever came across is the idea that where you spend your money is a representation of what you value. If you want to buy coffee every day and you can afford it, please, I beg you, buy your coffee every day and enjoy every sip of it.
Budgeting is also a tool that helps you measure if you’re going in the direction you want to or if need to switch it up. One of the first budgeting tools you can add to your financial life has nothing to do with spreadsheets or transactions.
It’s called the Urgent/Important Spending Matrix and it allows you to think about your spending based on what matters to you and not a bunch of “shoulds” (I’ve borrowed this from Steven Covey’s Urgent/Important productivity matrix, who borrowed it from the Eisenhower method if it looks familiar).
It’s helpful to make a list of some recent things you spent money on while you go through this. Write down the last 10 things you bought recently while you read about what each of the quadrants mean:
Urgent + Important: These are your short-term needs that you have to spend money on to make sure your physical self is being taken care of. Think: rent, car payment, utilities, cell phone bill, groceries, healthcare stuff, etc. When I ask people to write down the last 10 things they bought, these items often don’t make it on the list because they are just a given. Knowing what goes into this quadrant and knowing this number means you’ll be able to plan for what could happen if you had to go down to the bare minimum.
Urgent + Not Important: Now this is the category that is probably the most controversial with budget gurus, because technically you don’t need that coffee every day (and you could put that $5 into an investment account and maybe in 40 years blah blah blah). But, come on: You need that coffee every day.
This quadrant is meant for your emotional well being--for the non-negotiables that matter to you, because the idea of someone taking away your happy hour, pedicures, dinner with friends, or that weekly shopping trip makes life less awesome. You need to keep these “wants” in your life.
This is also the quadrant we often feel most guilty about spending money in. We’ve been told we should be embarrassed or ashamed about wanting to have these things in our lives, so we scold ourselves for indulging in them. But when we try to resist or restrict ourselves from spending in this quadrant, the money somehow gets spent anyway. Which leads us to...
Not Urgent + Not Important: Usually, the money you wanted to spend on stuff you knew you wanted but talked yourself out of ends up getting spent in this quadrant. This is the quadrant of mindless spending, or spending because you’ve used up all your energy trying to not buy something you really want, so you end up buying something you don’t even remember.
These are those trips to the drugstore or Target where you walk in planning to buy one thing and walk out with $100 worth of stuff. This is you buying that danish with your coffee even though you don’t actually care about the danish. This is you getting a little too used to calling an Uber or Lyft and not realizing it’s become a new habit (and by “you,” I definitely mean me too!)
This quadrant is the black hole of your money. It’s all the things you don’t even remember buying. It’s why it feels like you’re living paycheck to paycheck even though you feel like you make decent income. And once you figure out how much spending is happening in this quadrant, you can start redirecting some of it to the most neglected quadrant.
Not Urgent + Important: This quadrant is scary to think about. It represents all the future possibilities that you have swimming around the periphery of your brain: your first home, starting a family, quitting your job, or some other unknown that you can’t put your finger on or are maybe too afraid to dream about.
This quadrant is also the “I’ll do it later” part of your brain. It’s the “I’ll start saving when I make more money… when I get my tax refund… when I pay off my credit card debt… ” You’re hoping your future, more responsible self will get it together and make sure get your financial shit in order.
There have been studies done that show we literally think of our future selves as another person, so it makes it easy to push it aside. It doesn’t feel urgent. We know the things in this quadrant are theoretically important to us, but it’s much easier to allow ourselves to get distracted by the next shiny thing.
Which is all the more reason to start putting consistent and deliberate energy into this quadrant. How does that translate practically? Into a savings account. Into a savings plan. Into having savings. Even if it’s $25/week or $50/month, when you start setting aside part of your money--any part of your money--towards savings, you are acknowledging your future self every time.
I like to call this quadrant your “say yes” fund. You don’t always need to know what you’re saving for; instead, you are giving your future self the ability to say yes when a big opportunity arises.
Ask yourself why
Next time, we’ll talk about how to make Mint your new bestie so you can start assessing and tracking how your expenses fit into these four quadrants. In the meantime, what I want you to do is spend the next week asking yourself “why” before you buy something. Ask yourself which quadrant you’d put it in.
You can still buy the thing--please buy the thing! But start acknowledging why you’re buying it and what purpose it’s serving you. This is the first step to truly aligning your spending with your values, and when you start to see and feel what that looks like for you, you may never have to budget again.