Freedom comes from having a budget! A lot of people would say that is false because they think a budget is restrictive. Think about what is more restrictive. Not having enough money to buy groceries a week before pay day or following a budget that has accounted for grocery purchases for the entire month and having extra savings for emergencies?
Here are six important reasons to have a budget:
Bring you joy - It is satisfying to know you are taking a major step towards financial success and independence. Having a budget also means you are directing your money towards the things that make you the happiest.
Bring you wealth - Putting a savings goal in your budget helps build long term wealth. Twenty percent should be going into different savings accounts like a high-yield savings, IRA, employer retirement plan, or maybe real estate. These will grow over time and be available fund your goals later in life.
Avoid debt - Short term debt from credit cards is the biggest hinderance to creating long term wealth. A good budget helps avoid credit card debt because you control and cap every dollar.
Improved health - Surveys consistently find that the number one cause of stress is financial. This can lead to illness, loss of sleep, missing work, and poor quality of life. Having a budget helps relieve stress because you control your spending and savings. Budgeting also builds self-confidence and increases your sense of security because you likely have savings in case of an emergency.
Be a positive example to others - When your family and friends see that you are happy, have less stress and you are able to do the things you want you are creating a positive example for having a budget. Share the knowledge and hacks you found with others so they can improve their financial situation.
Influence over others - If your spouse and kids know what is important then everyone is working towards a shared goal. Just as it is easier to eat better if everyone around you is following a budget as a team will get you better and faster results. An additional benefit of sharing your budget with the family is that the kids will create positive financial habits. This will help them be prepared to be independent when they start their careers and make smart financial decisions from the start.
Getting Both Spouses to Follow a Budget
One of the more difficult aspects of family finances is getting both spouses to agree to a budget. Some feel a budget is restrictive and it is telling them what they can’t do with money. Others may find an envelope system or zero-sum budget calming because everything is planned out and organized. This article is intended to help both spouses open the lines of communication about their money and to provide ideas on how to start working on a budget together.
Lead by Example
Let’s start with what not to do: don’t tell your spouse how they should manage money. Nobody wants to be told what to do.
Instead, start by looking inward and focus on the things you can control.Consider the areas you can improve or what you want to achieve. It could be little habits like packing a lunch for yourself for work, increasing the percentage going into your 401(k), or buying less online.
By focusing on yourself, you can start making improvements immediately without having to convince someone else to make changes. You will be leading by example, which will hopefully do some of the convincing for you later on.
Ask for Help
Your spouse appreciates it when you work together on small things around the house or on a larger project. This allows you to spend time together, share an experience, and have a deeper understanding of your spouse. This can be applied to working together on your finances as well.
Each person has their own unique experience with money. It is important to communicate our past issues and accomplishments with money to help educate our spouse. Verbalizing may also help you discover issues quicker and should help limit financial conflicts between spouses. Just remember, feelings about money are intimate and deep. Each person should listen and not try to solve the problem right then.
Asking for help like this has some big benefits:
They know you best and will likely help you with something you’re struggling with.
They will appreciate and be flattered that you are asking for their help.
It opens the lines of communication between the two of you in a positive, constructive way.
It’s likely to encourage positive feelings towards you and your efforts.
By helping you through your own issues, it may stir some thoughts from your spouse about things he or she could improve.
Set a Regular Time to Talk
More than anything else, this is the habit that will keep the two of you on the same page and working towards the same goals. Consider planning a “Money Date” where you do something fun and at the same time discuss finances. My wife and I have found that talking about our finances once a month is frequent enough.
Having frequent meetings helps keep each other stay connected, up-to-date and stay focused on your goals. It also helps to avoid problems before they get too big and out of control.
Be Willing to Compromise
Even if you are the one in the relationship who handles the finances, you won’t make nearly as much progress on your financial goals without getting your spouse on board. Sometimes, that means being willing to compromise.
The concept of an “allowance” or “freedom” money may be something that will help you both use and stay on budget. It allows both spouses to preserve some independence, as this money has no restrictions. It doesn't have to be a lot of money but it is just enough that both of you are happy and don’t feel limited with your budget.
Pray
Budgeting and financial stewardship is an important part of every marriage. See this as an opportunity to come closer build a stronger marriage. Don’t let family finances be a point of contention that makes the rest of your marriage suffer.
Be patient and pray that God will guide you, give you wisdom, and free you of anxiety when managing your finances.
Give it Time
Bringing two different views on money and how to handle finances may not be easy but you will look back over the decades and say to each other, “I am happy we worked together to control our finances instead of letting our finances control us.”
Between now and then it will take some time to get organized and develop a system that works for your family. Understand that each of you may come to realize the importance of managing your money at different times. That is ok. Be consistent and focus on what you can control.
I look at my own situation and it took some failures to realize what I was doing wasn’t going to work. I needed to reflect on my financial behavior and develop a system that worked for me. Bringing another person with different ideas and perspectives about money into the system was difficult at times and we argued. But, over time we adjusted and created a new joint system that is working for us.
When you or your spouse has a misstep or is reluctant to follow a budget, be patient. Go back to the steps above, and start by focusing on yourself. Involve them by asking for help, pray, and try to let it grow naturally from there.
Each year you will refine and improve your personal finances and create a budget that works best for both of you.
We all need to know the truth about our finances and the only way to do that is by regularly tracking spending and income through a budget. It is important to be honest about your needs, wants and goals. Make a record of what you are trying to accomplish with your money so you can refer back to it when you are tempted to stray from the budget. As you continue to work with your budget it will get easier, more rewarding and create more financial freedom.
Christopher Peterson is a Certified Financial Planner™ professional, NAPFA member, fee-only financial advisor and provides fiduciary advice to his clients. Peterson Wealth Advisory was established in 2008.