I’ve been doing a lot of work the past three weeks helping clients prepare budgets. I think it’s that time of year. People start to freak out around December – I know I do. All this money going out – I’m going to be destitute! That thought doesn’t help when you’re already stressed out about other things that take place during December – that stuff you have to do in addition to your normal schedule that is causing the strain on your finances – shopping, going to parties, buying new outfits, buying all that rum to go with your eggnog.
So with all this money going out, it could be hard not to panic, unless you have a budget. Then you can just say to yourself – yes, I budgeted for Christmas! Phew – for a minute my heart rate was starting to go up.
Now you’re saying: “Renee, I don’t have a budget! I’m starting to panic!”
Don’t panic – it’s never too late to do a budget. You probably still won’t do it, after all, there are two types of people – those that do budgets and those that do not and if you haven’t done yet in life, you probably won’t. It’s true. I’ll admit I never change the oil in my car myself though apparently, it’s a piece of cake. I sometimes think I’ll do it, but no, I won’t.
You may not do a budget until you get stuck and there really is no more avoiding it. I see this a lot in my work helping people navigate their divorce (that is where I do most of my budgets) and no I’m not saying that if you don’t do a budget you’re going to get divorced, though maybe… Anyway, so I’ve had quite a few people ask for budget help the last while. This is often the first time someone has looked at their finances and they are looking at this newly minted budget at a stressful time.
When you’re feeling stressed and worried about the future it’s hard not to let that cloud everything around you. Even your budget.
This is a common occurrence. I help someone prepare a budget then I take all the information that we used preparing the budget and I help that person do a financial forecast. This is information that the person I’m helping can then use to make decisions.
This person turns to me and says:
What if I lose my job?
What if I spend more than I think?
What if the market crashes and my house value tanks?
And then I say: “well, we did prepare this budget based on some assumptions so yes, if the end of the world does happen, then this budget won’t be much use.”
This reassures the person slightly (actually no it doesn’t) and so this person then asks me: “what would you do Renée?”
And then I start to say “well, you need to go back to school and then you need to make more money and no more travel ever…” NO, I DON’T SAY THAT!
What I do say is: “I never give advice. – just information.” I can give you a few anecdotes about choices I have made in the past and what happened from those or I can tell you about stories of other clients, the choices they made and the results of those but I think that won’t serve you as well as if you go home and think about what you love doing. What do you find yourself coming back to over and over in your life? There is usually a link to this and where you spend your money. There is also a link to that and where you earn (or can) earn your money.
That is the work I did myself that helped me the most. Yes, I needed to know where I was financially and have an idea of how much I spend, but I also needed to know how I spend and why I spend it. I also needed to know how I could earn more money. At the time of my divorce, I really had no idea of how to go out and earn more money. It was only after I figured out what I had to have in my life that I realized that I needed to start my own business and it had to be a business where I can see the impact my work is having. It was no wonder I was unhappy in my prior life when I was working in a big organization where I had no idea what I was doing helped in any way at all. I had no freedom, no opportunity for growth, I sat in a little office by myself with no contact with the outside world. That job brought me lots of money though. But I was so unhappy and my future seemed bleak and spending money stressed me out because I thought I would have to keep doing that work simply to support myself.
Now that I know what drives me, I start thinking about what types of jobs will work for me. It also brings ideas for work that I would never have thought about before when all I was thinking about “I need a job that pays me $X amount of dollars.”
I was helping a client the other day – I asked her what she enjoys doing. Just before that conversation, she had been thinking and worrying about the future and her ability to keep a job. When she told me what she loves doing, her eyes lit up. It was exciting to see. What she told me was so far from what I like doing though it got me thinking. “She loves doing this?” I would pay her to help me with this.”
Knowing what drives you opens up an entirely new world. If you know what drives you and what you need in life, your budget will become the tool it is intended to be. It is a tool to help you make decisions. It is not a set of instructions that you have to follow for the rest of your life – just because we put that you get to spend $2000 a year on travel does not mean that can never spend a nickel more. Maybe you can take an extra job or cut back somewhere. Your budget allows you to decide where you save and spend and if you know how you like doing this, then your budget combines with this knowledge to make the decisions work for you.
What do want out of your life and how are you going to achieve that? That is the question that is going to help you the most. What is not going to help you is to look at your budget and find all the things where you are going to fail. Yes – I could look at my budget and say I haven’t put enough aside for when I lose my job and that can cause me to panic and shut down. Instead, I can say – I have enough to cover everything I need this year and I’m building savings and knowledge about myself that I’m going to use when I hit my next traffic light in life.