Going through life without instructions can be liberating. It can also be a recipe for disaster. This fact is why there are more 9 to 5’ers than entrepreneurs. 9 to 5’ers stay 9 to 5’ers longer than they would like because of one common fault. One of the biggest reasons entrepreneurs go back to 9 to 5’ers involves the same overlooked skill. Not everyone wants to be an entrepreneur, but everyone wants financial freedom. Delayed gratification is key. This skill can stop impulse buys or the feeling of needing the latest and greatest. A prerequisite to delayed gratification is budgeting. Budgeting is the difference between retiring in your 30s or 40s versus never being able to do so. It presents itself as a simple piece of paper on an excel spreadsheet. It can be that easy, but we like to make it more difficult. Let’s make it difficult and explain it away in detail.
Budgeting is a projection of income and expenses in its most bare-bones definition. It is our monthly income minus our monthly expenses. On paper, there is no way to go over budget. We all do. Why? How? We are spending money in many different ways. There is cash, which we feel as we spend. It is hard to spend $5000 in cash and not feel like you did. We then have debit cards. It is our money, so there is a limit, but we don’t feel it as we do when we spend cash. That is the danger. We don’t feel the swipe. It is too easy to spend. The other form is credit. Credit allows us to spend with ease and go way over budget. We pay for this because it eats away at our monthly budget, and we must pay it back with interest. That perfect budget gets a lot tighter when we have to set aside $250 a month to pay off that $5000 spending spree we enjoyed.
One benefit of a budget is that once done we can manipulate it to fit a surprise expense or a “not so much of a surprise” monthly credit card payment. We can look at our budget and see we have vital expenses and expenses that can be cut or trimmed, savings/investments, and spending money. It would be great to take all of our spending money and apply it to the credit card payment, but that is not realistic. It will also result in us adding to our credit card debt. We are going to need spending money. The right thing to do would be to skim everything that can be cut. This action will require us to practice a new skill.
Delayed gratification is resisting an immediate reward in preference of a later reward. Let’s look at that new $250 coming out of our monthly budgets. Delayed gratification will mean out with a couple of $10 and $15 monthly subscriptions, a 10% cut on the food budget (one of those trimmable expenses), and then cutting spending money. We didn’t cut savings/investments because that is the path to financial freedom. This strategy gives us three things. It allows us to pay off a spending splurge. More importantly, it teaches us live without some of the fluff expenses we thought were necessities. The best thing we will receive is the ability to do it again. We don’t want to do it again, but the skill enables us to do something greater. We will know how to tighten our budgets to allocate more money into savings and investments, expediting the process to our goal. This method can become a game that only helps us. Can I get by cutting my food budget by 20%? Do I need cable? How would I do if I slashed my monthly spending money in half? The only way to get to this point is to create a budget.
In closing, budgeting is one of those skills that provide gifts in perpetuity. Many believe most people’s problem is they don’t make enough money. This statement is not factual. The problem is they don’t know how to live with what they make. Yes, everyone wants to make more money, but if you cannot budget $4000 per month you will not be able to budget $8000 per month. Skeptics may read that last sentence and think, “Well, not me.” We’ll that is the same attitude athletes, entertainers, and temporarily successful entrepreneurs had. Look at the numbers regarding how many of them grew up without money, only to become rich and lose it all. How? Well, it is simple. They never learned to budget, so they were never led to practicing delayed gratification. In this case, they only needed two strikes to be out. Don’t be them. Learn to budget what you have now. You’ll be on your way to financial freedom way before you ever thought possible.
Food for thought. You do the dishes.
