The word budget is all wrong

Since writing the last post about budgets I have spoken to many women about this part of our financial lives and I have come across an amazing woman called Mindy Crary who writes a lot about it. And I have realised the problem. The problem is language. It’s the word. The word budget is all wrong, it feels like a diet. It is associated with restriction, deprivation and sacrifice. No wonder whenever I ask someone whether they have a budget, then squirm in their seat.

The thing is though, to build your net worth, (which is what it is all about), you have to know where your money is going. It doesn’t actually matter what your income is if you have no idea where the money goes.

Budgeting is a lifestyle choice – it’s a bit like healthy eating. It’s an ongoing challenge. It might be hard and uncomfortable at the start, but it can be built into our life and become habit. The truth is that budgets are what separate the financially successful from the financially mediocre. The ONLY way to become financially successful whilst standing on your own two feet is to spend less that you earn. That is a choice you have to make. I, nor any other financial planner, can force you.

So, my suggestion is we ditch the word. Let’s go with Mindy’s term – conscious spending plan. She writes ‘we need to stop thinking about budgets as something that prevents us from doing something and start thinking of it as something that helps us become more conscious of who we are relative to our relationship with money’. If we become conscious about our spending we can start to make the choice to spend on things that are meaningful to us and cut back on the things that have no significance. What we are trying to do is achieve the most life satisfaction from the money that we have. Conscious spending plans are about enhancing life, not detracting from it.


What does not work is to arbitrarily cut spending – it’s just like a crash diet. Short term gain maybe, but in the long-term it will prevent us from succeeding. However, just like if you want to lose weight you have to step on the scales, if you want to grow your net worth (and who doesn’t?) then you have to gain clarity around your spending. You have to see where the money is going.

The key is to bring your money and spending decisions into line with what you really want. If you think you SHOULD want certain things – a bigger house, bigger boat, designer clothes – but what you really desire is actually a deeper connection with your family or husband, no amount of money or spending will ever make you happy. Keeping up with the Joneses will only lead you to live in a house you don’t like, own a boat you never use, wear shoes that destroy your feet and you will just spend too much on all the wrong things. You have to make a budget that satisfies you, your goals and what is important to you in life.

What can help is to have a journal – start tracking your feelings about your spending. Mindy suggests that you note things like; how excited were you before the purchase, what do you think this purchase will get you that you don’t already have, how satisfied were you after the purchase and why? If you find it hard to feel anything, rate your feelings on a scale of 1-10. The feelings will come, with time.

Always remember though, just like all aspects of financial planning, this is a fluid process. Spending changes because life changes. That's just how it is.