No wonder “budget” feels like a fighting word!Posted: October 18, 2013
The most straightforward definition of “budget” (n) is: “a plan for the coordination of resources and expenditures”. Hmmm. Coordination. What a great word – sounds so logical. And yet, the word “budget” tends to evoke the same emotions as “diet” (whose simplest definition is “food and drink regularly consumed”): feelings of deprivation and constraint. And the very thing you tell yourself you are cutting back on is the thing you can’t live without at that moment. So what if you don’t call it a “budget” at all? What if you make up a word or phrase that shifts whatever you feel when you say “budget” to something you like – “travel plan” – or make up a word that makes you laugh or feel good (“mugwump”?). Great. Now you have the label out of the way – what next? What is “normal” for a budget? Well, “normal” is having expenses that are less than income. But to really get at it, you can start with your income and the “50/30/20” split: 50 percent of your income is for housing and related bills (maintenance/utilities/insurance/rent or mortgage), 30 percent is for personal expenses (education/clothes/kids/entertainment) and 20 percent is for savings (emergency fund/debt repayment/retirement). And please note, I said START – the percentages can change depending on your values: maybe your housing costs are low and you choose to spend more on personal expenses – so you look more like “30/50/20” – or maybe you are focusing on paying down debt and saving as much as possible right now, so you look more like “30/30/40”. Wherever you are, just start somewhere and make a plan, and review it every month to see if it’s working for you The whole point of a budget or a mugwump or whatever you want to call it is to give yourself choices: you want to be proactive in your choices instead of reacting. Don’t take your cue from the government battles – “budget” IS a fighting word in that context. But in your house it doesn’t have to be.