Pamela Johnston of Redefining Success The difference between a budget and a spending planI like to think of a budget the same way I think of a diet.

When you’re on a diet, you are focusing on putting limits on what you can eat, and what usually ends up happening? You are forced to focus on all of the things you “can’t eat”! Following a diet usually means constantly saying “no”, and counting calories or fat content. It’s basically a budget for how many calories we are allowed to consume in a day, or at each meal.

When we create a budget, we are basically focused on paying down our debt and saying “no” to all of the extras that we think we should be avoiding. A budget forces you to think about all of the things you can’t have and all of the things you can’t do.

Just as a diet can make you feel guilty about every calorie you eat, a budget might make you feel guilty about every dollar you spend. After all, when it comes right down to it, the only money that you absolutely NEED to spend would be for essential food, housing, and very tiny number of other supplies and material possessions. When you’re focused on a budget, it’s easy to start second-guessing every purchase, or to abandon the budget altogether because it’s too depressing to follow any longer.

Of course, for the good of our health and the good of our wealth, we can’t just constantly eat and spend whatever we want.

So the question is, how do we keep ourselves on track financially without driving ourselves crazy over every dollar earned and spent?

Don’t get me wrong. Budgets can be important tools for managing your daily finances, and they work wonders for some people. The same can be said about diets. But if you’ve been struggling to find a budget that will work for you, it’s time to step back and look at your money management challenges with a fresh perspective.

Instead of focusing on a budget, I want you to think about creating a spending plan.

What is a spending plan? What makes a spending plan different than a budget?

A spending plan does share some common considerations with a budget. Like a budget, a spending plan takes our income and expenses into account, and it does require us to think about some of the discretionary expenses that we can reduce or eliminate, at least for now.

That’s pretty much where a budget “ends”. A spending plan, however, leaves us room to consider the lifestyle we want to lead, and to understand the resources we have at our disposal for taking care of our needs as well as some of our wants.

It allows you to think about what your priorities are, and to plan how you are going to finance all of the things that are truly important to you.

For example:

Do you want to take a yearly vacation somewhere warm?

Do you dream of a new kitchen?

Are you a music lover who wants to treat yourself to a concert every month?

Is going out for dinner once a week worth every extra penny because it makes your busiest weeknight just a little easier?

Basically, a spending plan goes beyond paying your bills and reducing your debt and lets a little joy and relaxation into your daily spending habits.

How great would it feel to pay for your next vacation from a little pool of savings that you have set aside, rather than on credit and adding to your debt?

How relaxed would you feel knowing that you have planned ahead and saved up the money needed to replace your car when the time comes, rather than being forced to get a loan?

What happens if I realize I don’t have enough money to go around?

When you sit down and think about your income, your expenses, and your dreams and goals, you might start to feel like you don’t have enough money to go around. It’s nothing to get stressed out about. That’s where Redefining Success can help!

My team and I can help you put all of the pieces of your financial puzzle together, and help you choose the right investment tools to get your finances heading in the direction you want to go. If you’re struggling to figure out what your most important priorities are, or need help blending your priorities with a spouse, family obligations, or other challenges, we have resources to help you work through it all.

I want to leave you with one last thought about the difference between a budget and a spending plan.

Ultimately, it comes down to the thought process or perspective.

A budget works from the perspective that you should be reducing and eliminating non-essential costs to reduce your overall spending.

A spending plan works from the perspective that you have permission to spend your money in a way that allows you to pay not only for the necessities, but also the niceties. In a spending plan, you think about your income as a resource that you allocate to each of your different spending categories, which will include fixed expenses, debt repayment, retirement, and various savings goals.

A budget tries to help you see where you can tighten up to hang on to more of your money, while a spending plan shows you where you can make different choices and make changes to where your money is going.

If you want to explore creating a spending plan rather than a budget, we’d love to help! Let’s talk about how we can take you from obsessing over what you can’t have to getting excited about what you are working towards!

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