Is Your Budget Keeping You Broke?
How to manage money and maintain your abundance mindset.
In theory, budgeting and abundance don’t mesh well. After all, budgeting is strategically a way to save money and build a stash, while abundance teaches you to live as if the possibilities are limitless and money will flow freely at all times.
If you’re saving for a rainy day, you are essentially planning for financial dips and slow periods. Budgeting in the traditional sense has always felt restrictive and limiting, right? Where are the opportunities for joy when you only have $50 allocated for “entertainment” for a whole month? Why do I need to make my coffee at home just because I can? Because sometimes that $4 coffee gives me the mental/emotional/spiritual boost I need to get through a tough day.
Most often, things are never as bad as they seem. I can usually identify ways to get what I want with only a few minor changes in spending, and when I desire more I can accurately say how much more, (specifics are the key for manifestation). In reality, both budgeting and an abundance mindset can work together with the right intentions behind both.
So, how is an abundant budget created?
First, a couple of warnings and suggestions:
Creating a budget will require you to open and look at your bills. This might be something you’ve been avoiding, but it’s necessary while doing this work.
It’s best to set aside a few hours for your first time planning. Once you have a solid foundation, it’s easy to make tweaks and adjustments.
The result creates opportunities to make better financial decisions for yourself. Remember, a budget is not about judgment, it’s about choices
The abundant budget starts with a series of questions. Grab some paper, a pencil, and a calculator and let’s begin.
1. What assets and income streams are available to you today?
Can you count on your business to bring you any amount of regular monthly income? Do you have a regular paycheque? Is there money in the bank? Investments that you can liquidate, (cash out if needed)?For the self-employed, what is your average monthly income over the past year? What was your lowest monthly income and which month was this?
2. What do you desire in the medium to long-term (5+ years)?
Would you like to have a set dollar amount in the bank? Is there a big move in your future? A dream vacation or maybe you’d like to be debt free, mortgage included?
The possibilities are endless.
List out 3 to 5 things you dream of being, doing, or having. Then note what you expect the dollar value of each item to be.
3. What are the costs of my necessities?
Include in this category rent/mortgage, basic utilities, and groceries. Think Maslow’s hierarchy of needs: food, shelter, and security. It is essential for any budgeting methodology to know this amount.
The ability to cover your basic needs provides the foundation for you to achieve your higher order needs: belongingness, esteem, and self-actualization. First, make a list of the average monthly amounts of each bill then add the items. The total is your basic monthly minimum, the amount that you need for survival.
Tip: Make a note of the due date of each bill so you can see if some weeks require more cash than others. I track all my recurring payments in my monthly calendar which help me see what is coming up not only this week but also the next few weeks.
4. What are you obligated to pay?
These are bills you have contractually committed to for a period of time. Do you have a credit card or loan payments, car leases, anything financed through a “buy now, pay later” plan?
Two questions here:
1) What is the minimum amount owed each month, and
2) What would the monthly amount become to pay off this obligation within 3 years (or less)?
Tip: You will need these amounts to calculate your debt-to-income ratio. This ratio provides insight into how financially vulnerable you are and gives you the power to make good decisions.
5. Next, what are your lifestyle expenses?
Think cell phones, unlimited internet, a date night, your daily caffeine fix. Items we often refer to as essentials, they add to your quality of living but if necessitated could be cut back or cut out.
The thing with lifestyle expenses is this is where the mindless spending comes into play. There is no judgement here on good vs bad. Instead, the question should be, does the cost of X provide what I truly desire and value? Note your answer on a scale of 1-10 how important is it for you to have each expense.
As you review your lifestyle expenses prioritize, what do I need to have a life I love and what is merely nice to have?
Tip: Rank your expenses, 1= Essential, 2= Functional, 3=Non essential
Let’s bring this all together now:
Each month I have $_____ available to me.
I choose to allocate $____ so I can have (dream item) in x number of years.
My survival needs cost $____.
This leaves me $____ to cover my current lifestyle.
I am obligated to pay $____.
I have $____ to spend or save as I choose.
As you look at your budget what are you noticing? Write down any thoughts or observations.
The next question, on a scale of 1-10 how satisfied are you with your current budget?
Are you able to financially cover your current lifestyle?
Are there opportunities to adjust your current spending habits that will allow you to align with what you value?
How does your income need to change to serve you best?
Contrary to what we’ve been taught, money does contribute to your happiness. In 2009, Nobel Prize winners Economist Angus Deaton and psychologist Daniel Kahneman conducted a study. What they discovered was that money does contribute to your happiness but only up to a point and having money reduces the stress of adversity in our day-to-day lives.
Budgets aren’t always about laying bare the dollars and cents of your daily life into an excel sheet. Instead, consider how money supports you to achieve what you truly value. Because when you have that clarity, the decision about that $4 latte become so much easier.
You have now created an abundant budget which focuses on possibilities and values. I’m curious, what have you discovered? Tell me in the comments below, or if you would like 1-on-1 support contact me for a private abundant budget session.