If you have struggled with debt, as I have, then it is very likely that you aren’t super comfortable with budgets. In fact, you might even be a little scared of them. What you may not realize, however, is that the purpose of a budget is not to take over your life and make sure that you never spend money ever again.
It’s possible that having a budget like a steel trap, with no wiggle room, is ultimately what we need but that isn’t really the point of having a budget in the first place.
No, the purpose of a budget is to keep us honest with ourselves and to hold ourselves accountable for our actions. If we have a spending problem that is contributing more debt to the equation in the long run than all of the budgets in the world aren’t going to do a thing unless we are prepared to hold ourselves accountable for our actions.
What Happens When the Purpose of a Budget is Unclear
It’s likely that you’ve looked at budgeting before today. It’s also likely that you just found a system that looked good, tried to cram your spending into it with plenty of rationalizations about why you needed this and that, and then got incredibly frustrated when it all blew apart a month or so into the experiment. I know how likely it is because the same thing has happened to me. Once it falls apart, it’s easy to come up with lots of excuses for ourselves about why it didn’t work, how it was someone else’s fault, and how it’s just too hard.
Unless we are willing to budget with purpose, then nothing positive will come out of it in the long run.
We aren’t here today to discuss specific budgets or determine which method would work best for us. We’re here to find out how to have a purpose behind a budget so that we might actually tackle some of the issues that are at the core of the problem. We must believe in the budget and admit to ourselves that we have a problem.
Answering the 4 W’s to find the Purpose of a Budget
According to Inc.com, accountability has to start at the beginning of any process, and this includes finding a purpose with your budget. Their process involves asking yourself the 4 W’s: What, Why, Who, and When. If you can answer these questions honestly then you will be able to define your goal and dig a little deeper into the issues that are causing your debt in the first place.
This is probably where most of us look at budgeting as a surface level problem instead of identifying the deeper issues. Obviously, getting out of debt is what we want to do, but it goes further than that. Sometimes the issue is that we aren’t making enough money – it’s hard to pay bills without a job – but often it is because our priorities are not in line with our financial capacity.
If we look back at our spending, it will probably be obvious where we are overspending. It could be:
- Eating out frequently throughout the month
- Weekly trips to a clothing store
- Frequent online browsing accompanied by impulse purchases
- Subscriptions to things that we barely use (newspapers, magazines, gyms)
You get the point.
Here are two ways of stating our “what.” Which do you think will be more effective?
- I will budget to get out of debt.
- I will use a budget to help identify and control the unnecessary spending throughout the month that contributes to my debt. Instead of taking weekly trips to the mall to look at clothes and end up spending $200 per month, I will budget $100 each month and only shop when I need something specific.
See how that works? By identifying and focusing down on the actual problem, you can clarify your what into a more specific purpose. Getting out of debt with a budget is hard but slowly changing reckless behaviors is less hard.
Answering this question is all about the bigger picture. Having some more money in your checking account isn’t really looking big enough. Here are a few examples of looking at the bigger picture:
- I want to get out of debt so that I can save for retirement and not have to worry about working my whole life.
- I want to be able to save for my children’s’ college
- If I become debt free, I will be able to travel more freely
- Giving is important to me, and I’m having a hard time helping others until I help myself
Linking the budget to something bigger than ourselves helps to provide an extra anchor point for stability and accountability. If we ask ourselves “Which is more important: the new clothes or my children’s college fund?” then we’ll be more likely to stay strong. Again, it doesn’t mean that we can never buy things for yourself but rather that we are considering our real priorities when making a financial decision.
This one is pretty obvious. Who else but ourselves are ultimately responsible for our actions?
Once we’ve determined the purpose of a budget, then we have to affirm that we are the ones responsible for making it happen. Don’t make excuses or try to blame someone else if you make a wrong decision. Own up to every mistake and try to do better next time.
If you are married, then it might make sense to include your spouse in this equation or it might not. Personally, my wife and I are one person when it comes to our finances, and for us, it is a team effort or no effort at all.
What gets measured gets done, and this is definitely the case with budgeting and accountability. If our goal is to become debt free “someday” then that is exactly when we will become debt free, “some day”. We don’t have to know the exact date of our very last payment to a creditor, however, and breaking the goal into milestones is an excellent way to create a “when” for our budgeting plans.
One way to create those milestones is to make a target to completely pay off one creditor, like a store credit card or a car loan. You can take the number of payments you have left, plus an extra amount that you can contribute each month to this goal, to calculate a pretty close timeline for a single bill payoff.
Once that is done, consider a small reward and then get back to the grind stone. Over time, those milestones will help build momentum and pretty soon “some day” will be today.
Find an Accountability Partner
Staying accountable for a budget is hard, okay?
Just because we are ultimately responsible for our budget doesn’t mean that we can’t ask for help though! Entrepreneur magazine suggests finding a “success buddy” to help take responsibility for our own success and eliminate excuses. This accountability partner could be your spouse, your best friend, or just somebody from the office that needs help staying accountable for something too. Meet at least once a week with this person and go over what went right, what went wrong, and what your next step will be.
Advantages of Budgeting for Accountability
Hopefully, we can agree by this point that the purpose of a budget has to be specific and without accountability, it is significantly less likely to work out right. To recap:
- Ask “What” you are trying to accomplish with your budget.
- Find out “Why” you want to have one in the first place.
- Determine “Who” will ultimately be responsible for the outcome.
- Use milestones to identify “When” you should be meeting your goals.
- Look for an accountability partner to help you stay on track
Hopefully your next budgeting exercise, and mine, will work better than the one before. When it comes to getting out of debt, it’s important to use every weapon at your disposal to win! If you have any other tips on staying accountable to your budget then feel free to leave a comment below!