Budgeting is touted to be a good financial discipline. It is recommended in most financial books, to be used religiously in both your personal finance and business finance. It basically is a tool so that you won’t spend more than what you think you can spend. Does budgeting work for you? Do you find that you stick to your budget often? If you or your company’s spending is different from the budget, do you tend to spend over or under budget?
The professionals like budgeting. It keeps them in employment. For those who use to spend aimlessly, they too will definitely find budgeting a welcome tool to keep the finances in check, as long as they stick to their budget. Companies distribute their money internally through budgets, different budget for different people/department. Government distribute money through budgets as well. So it does seem like the whole world is doing some form of budgeting!
The result of budgeting? Say you have $1000 to spend this month, provided you stick to your plan, you will spend exactly $1000, give or take a few dollars. So, even though you have spent $800 with $200 to spare, you will still spend the remaining $200, probably as a pat on the back for a job well done. This is especially true for large companies, where the remainder from the department budget are normally splashed out in some form of parties or rewards for that department. Of course, good budgeting will also include a “what to do with the remaining $200″ instruction.
But that’s not what I’m trying to get at.
Budgeting is only a financial tool. It serves as a supervisor of your money. It does not, however, change your purpose in life. It does not change your company’s purpose. You are still being guided by the same purpose, so why spend the remaining $200 any differently from the first $800?
Unless the remainder was also purposefully decided how it should be spent, i find it strange that we change our purpose just because of a financial tool! If I want to hammer a nail, I use a hammer. My purpose of hammering that nail doesn’t change with a sledgehammer. In fact, I will still need to swap/sell that sledgehammer to get myself a hammer that can actually do the job.
If you always have a different purpose for this $200, this will also change the way you spend the first $800! Skimping and scraping just so that you can have $200 (or more) to spare is not a very healthy financial plan.
No matter how much money we have, we are still striving to achieve our purpose in life. Imagine that your purpose in life is dotted with goal posts along the way. Money may only affect the time and manner in which you move from one goal post to another. It will not change the goal posts, and it certainly won’t change your purpose! In fact, by spending the first $800 ultra-frugally, and splurging on the remaining $200, you would have spent 80% of your time thinking of ways to spend that first $800. That will probably take you 80% of the way from Goal Post 1 to Goal Post 2. However, just because your purpose changed for that remaining $200, you will actually take a step back from your Goal Post 2, moving away from achieving the next goal post!
So stick to your purpose, you may not even need to do budgeting! You may not even hire that person in the first place, that very same person you’re trying to lay off now…
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One Comment
The Dao De Jing tells us to “reduce our wants; husband our resources.” Given today’s financial climate, that’s exactly what I’m doing.