Douglas Rice, DBA is an assistant professor in the School of Business and Management.
The recent economic downturn has brought the word "budget" in many households. Some feel this word is ugly and has no place in their lives. Certainly, the word isn’t associated with fun, excitement, or living life to the fullest. You don't hear it used in advertisements. It’s not a party topic. Budgeting is associated with limitations, drudgery and sadness. But that’s just perception, not reality.
Budgets allow you to maximize your life. If you don't have unlimited wealth, how you live your life is about making choices and using the resources you have to fund your wants. A budget is about deciding which wants can be satisfied. It simply brings reality back into the picture. You can’t have everything, but you can have a great life. Here are some ideas for getting started.
Make conscious choices: When you plan ahead and think about the impact of your actions, results improve. Increase your sensitivity to how you're spending your money. For some that could be making a note every time you spend money. If that’s too analytic, just ask yourself this question every time you spend money: “What am I giving up for this?” By making a conscious decision and framing the situation as a choice, you empower yourself, and you won't spend out of habit or without concern for the consequence.
Live for yourself, not strangers: The Jones family has more wealth than you do, and keeping up with them is expensive. Instead of trying to live their life, think about having a life of your own. Be specific. Write it down. Talk about it. Plan for it. If you clearly describe the life you want to have and the one you can really afford, you can work toward those goals without coveting the life of others.
Change your habits: It isn't an easy task to change your habits. If you aren’t sticking with your budget, this is typically the reason. You do things that cost more than you earn. Options like credit cards allow habits to form without consequence in the short term, but in the long term their impact can be devastating. The best way live within your means is to make new habits. List all the great things in life that excite you but don’t cost money. Then start doing them, and you likely find that they push out your old, more expensive, habits. Just because something costs money, doesn’t mean it’s more fun or enjoyable.
If you think about making choices instead of budgeting, you can choose to live your life given the resources you have. Make those choices conscious ones. Make choices that are about you and what’s important to you.
Change your old ways of doing things by putting in new, more exciting, and more important things. Better choices equal a better life.