Budgeting: handling money with your eyes open

This is likely not the first time you’ve heard about budgeting. Maybe it’s the millionth time. It doesn’t really matter because simply being familiar with a life-changing concept doesn’t change your life. You have to act on it.

Let’s be clear. A budget is just a plan. A plan says I expect to make this much money over a certain period (typically a month), and here’s what I intend to do with every dollar that comes in. That’s it. Not complicated.

So why is this plan called budgeting so crucial?

Because financial stability and success don’t happen by accident, we don’t accidentally exercise delayed gratification or accidentally set aside money for the more important things in life. These behaviors require intentional self-control, and budgeting provides the framework for exercising that self-control. However, having a budget doesn’t guarantee wise financial choices. We humans excel at making foolish choices on purpose, but at least when doing so, we act with our eyes open. It’s usually the case that when we have our eyes open, we can see the consequences of our actions. And when we see the consequences, we tend to exercise more self-control to avoid negative consequences.

Hence the need for budgeting, which opens our eyes to the consequences of our financial choices.

If you want to have an emergency fund, pay off debt, replace your car with a more reliable one, buy a house for a growing family, build wealth for retirement, or accomplish any other wise financial goal, then budgeting isn’t optional. If you aim to indulge every spending impulse you feel, ditch the budget. You can do that with your eyes closed. Until you run out of money, that is.

To learn more about how to set up a budget that works well for you, check out this free budget guide from Ron Blue Institute.