Budgeting as a financial planning concept generally gets a bad rap. For many people, it conjures a scarcity mindset (“I can’t ever buy a latte at Starbucks”). For others, it’s simply boring: the idea of counting every penny instead of living life.
Let’s explore a more positive view of budgeting. Before you swipe left and dismiss this blog as not worth your time, think about people in your life who might benefit from a positive view of managing their own money.
The Big Picture
Budgeting is simply the idea that you should align your spending and saving with the things that matter most to you. Picture your finances as pieces of a jigsaw puzzle, and your budget serves as the tool to carefully assemble these pieces to create the best possible financial picture.
When you craft a budget, you’re essentially planning how you’ll distribute your income among various priorities such as bills, leisure activities, purchases, savings, and future investments. It’s akin to determining which puzzle pieces represent your most valued goals. Through budgeting, you can allocate your resources thoughtfully to realize these aspirations without facing financial strain. In essence, budgeting acts as a financial roadmap, guiding you towards your desired destinations.
One good thing to keep in mind: Budgets are not prisons. The best ones are flexible and don’t make you feel guilty. They should be helping you understand where your money goes – ideally, it’s going to places, purchases, experiences, and bills that help you live a fulfilling life.
Getting Started
Here’s a good first step: understand where your money is going right now. There are many tools you can use to understand how you spend money and create a budget. Some have a monthly fee, some do not. You Need a Budget is among the many online options to consider, while Moolah U is potentially a great learning opportunity for kids. Another option is our financial planning portal – one of many benefits of working with BentOak Capital. Each of those options will work best once you link your existing bank accounts, credit cards, and more. The idea is that tracking what you spend money on is easier if it’s done mostly automatically for you. Keep in mind that some expenses (property taxes, car registration) don’t happen on a monthly basis and might need to be entered manually for now. If you’re not interested in an online solution, a simple pen and notebook or a computer spreadsheet will do the job just as well (though with less handholding). People budgeted forever without online services, after all.
Second, review your current spending and see if it aligns with what you value. If you mostly value (for instance) time with the kids, time outside, and time with extended family, then check to see if what you’re spending really matches that. If you’re spending money on things, bills, or experiences that take away from time with the kids/nature/family, then consider whether you should reduce or eliminate spending money on those things. If there are things you highly value that you are not currently spending money on, then consider adding it to your budget. If, for instance, you value taking care of your personal and mental well-being, you might budget in a monthly massage or gym membership, or a state park pass for hiking, or….
Third, what would you like to do (or do more of) in the future that you are not or cannot right now? If you want, we can call those things “goals” or “dreams.” We’ll take horses as an example. You want to buy a few horses for the kids, and then house, feed, and care for them. There are costs to each of those things – maybe you already have an idea about what those costs are. Now consider when would you ideally like to make that goal a reality? This will help determine how much you need to set aside each month specifically for that goal or dream. Some of your goals might happen soon. Others, like building a new house, college tuition for children or grandchildren, or a big family trip might be many years in the future.
Fourth, be flexible within reason. As I said earlier, a budget isn’t a prison, and it shouldn’t be a source of guilt because you “aren’t following it.” I hope I’ve conveyed strongly enough that a budget is just a tool for helping you 1) know where your money is going, 2) ensuring your money is being spent or saved in accordance with the things you think are most valuable, and 3) giving you a structure for how to take your dreams for the future and make them a little more real today.
Each of these points could be expanded on much more. There are tons of books, websites, news articles, magazines, and products about budgeting so obviously there’s a lot that can be said – and just as many ways to do something about it.
If something in this blog causes you to pause and think that you might want to discuss more with a BentOak Capital advisor, please contact us at 817-550-6750.
IMPORTANT DISCLOSURE INFORMATION: Past performance may not be indicative of future results. Different types of investments involve varying degrees of risk. Therefore, it should not be assumed that future performance of any specific investment or investment strategy (including the investments and/or investment strategies recommended and/or undertaken by BentOak Capital [“BentOak”]), or any non-investment related services, will be profitable, equal any historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. BentOak is neither a law firm, nor a certified public accounting firm, and no portion of its services should be construed as legal or accounting advice. Moreover, you should not assume that any discussion or information contained in this document serves as the receipt of, or as a substitute for personalized investment advice from BentOak. Please remember that it remains your responsibility to advise BentOak, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. A copy of our current written disclosure Brochure discussing our advisory services and fees is available upon request at www.bentoakcapital.com/disclosure. The scope of the services to be provided depends upon the needs of the client and the terms of the engagement. Historical performance results for investment indices, benchmarks, and/or categories have been provided for general informational/comparison purposes only, and generally do not reflect the deduction of transaction and/or custodial charges, the deduction of an investment management fee, nor the impact of taxes, the incurrence of which would have the effect of decreasing historical performance results. It should not be assumed that your account holdings correspond directly to any comparative indices or categories. Please Also Note: (1) performance results do not reflect the impact of taxes; (2) comparative benchmarks/indices may be more or less volatile than your accounts; and, (3) a description of each comparative benchmark/index is available upon request. Please Note: Limitations: Neither rankings and/or recognitions by unaffiliated rating services, publications, media, or other organizations, nor the achievement of any designation, certification, or license should be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if BentOak is engaged, or continues to be engaged, to provide investment advisory services. Rankings published by magazines, and others, generally base their selections exclusively on information prepared and/or submitted by the recognized adviser. Rankings are generally limited to participating advisers (see link as to participation criteria/methodology, to the extent applicable). Unless expressly indicated to the contrary, BentOak did not pay a fee to be included on any such ranking. No ranking or recognition should be construed as a current or past endorsement of BentOak by any of its clients. ANY QUESTIONS: BentOak’s Chief Compliance Officer remains available to address any questions regarding rankings and/or recognitions, including the criteria used for any reflected ranking.