Blowing the budget! Just saying those words can make me cringe. So just when is blowing the budget OK? Ultimately that is for you to decide but I say whenever you want to as long as you are prepared to give up something in return.
A Budget is a Roadmap
The purpose of a budget is to help you to reach your financial goals and to guide you in your financial decisions. Budgets are not set in stone and should be flexible enough to allow for some freedom in how you spend your money. Financial and personal goals will change throughout your life and your budget should change along the way. If you don't have a budget I encourage you to sit down with your loved ones and make one. Start with your short-term financial and personal goals and then move on to your long-term financial and personal goals. The goal of creating a budget is to have a healthy dialogue about needs versus wants and how to pay for them. You can develop a sense pretty quickly of whether you need to increase your income, cut spending or both. It really is pretty simple, if you do not have the income to fund your goals you need to go back to college or gain the skills so that you may increase your income. More importantly, if your financial and personal goals are not shared by your loved ones there is a good chance there will be conflict regarding financial decisions.
A Budget Should be Flexible and so Should You
Like the song says, you can't always get what you want. Well at least most of us can't. Struggles over personal finances usually are a result of an inability to reconcile the difference between needs and wants. Inevitably you will encounter a situation that will require you to make a decision about spending more money than you had planned. How you handle this situation will have a determining factor on whether you will reach your long-term goals. In other words, you will need to decide if spending the extra cash now is worth the impact on your future goals. Is that latte or pair of shoes worth having to eat spaghetti and left over meals for a week? Or will you decide that you will have the shoes and your steak dinner and worry about retirement later? Only you can decide that.
So when is it OK to blow the budget?
Let's face it, if you are blowing the budget every month that is never OK. If you did the work and crafted an honest budget then the budget will guide you in your day to day decisions. If you did not do the work necessary to develop a real budget then you will struggle to achieve your financial and personal goals. Not having a budget can result in overspending and credit problems which can affect your credit score and cost you more in higher interest rates. If you find yourself in this situation, you may want to consider getting professional advice from a firm that has an established track record of helping individuals with credit problems. There is a parallel in the fact that the US Government is now belatedly coming to terms with the fact that it has lived well beyond it's means and will have to make some painful cost cutting measures as a result. Hopefully you do not find yourself in a similar situation, loaded with debt from financing a lifestyle you could not afford. If you do, seek credit counseling immediately, cut spending, and increase your income.
A budget is a tool that we use to help guide us to our goals so take the time to craft a good one and stick to it!
When did you last overspend? Did the experience change your spending habits? Leave a comment!