I can safely say that my first budget was a total and unmitigated disaster. Why was it a disaster? The short answer is because it failed – I never lived my first budget but simply feared and loathed it. I suspect, however, that this is one of the cases where the long answer is more instructive. So here it is.
To the readers who have already gleaned something of my past it is already obvious that I did not have a budget in my hedonistic past – most people who roughly know how much they earn but have absolutely no idea how much they spend or what is the state of their bank account are as far from budgets as they are from the sky. Too far at any rate!
But then I had my crisis, I had my epiphany which came in the form of rather substantial ‘negative wealth’ (this one I will have to explain separately but it is another way to refer to debt). And everywhere I turned – which was mainly to friends and the almighty internet – there was one advice that kept cropping up. Start budgeting! Set yourself a budget!
Where do I begin? Budgets are exact and I had no exactitude where money was concerned. Let us just say that a friend took a pint of milk out of her fridge and asked me how much it costs. Yep, you guessed it; I had absolutely no idea. How is someone who doesn’t know how much approximately they pay for a pint of milk to set a budget?
So this is how I did in exact order:
• I looked at how much our income (I) is per months.
• I checked how much we pay on mortgage (M) and ‘negative wealth’(NW).
• I looked at a bank statement, talked to my husband and worked out how much we pay on bills (B).
After that I set an amount per week (ApW) that was to cover all the rest using the formula:
After the initial feeling of self-righteousness and satisfaction the real disaster hit home. Real disasters are rarely about money – they are usually about the feelings that our dealings with it bring about. In quick succession I went through
• Panic that living within the stated amount per week is not possible and that my children will not be able to go to school because they do not have shoes and they will most certainly go hungry. Also there was nothing left. How are we going to make it if something unexpected happens?
• Paralysis in that there was nothing further that could be done. Life had to go on, shopping for the food and paying for products and services had to be done in the same way these were always done – with little awareness or choice. At the same time every time I had to spend something my stomach went into a spasm and my hands, with a will of their own, refused to go in my purse.
• Despair that we will live like that for a long time – deprived, scared and paralysed with nothing to look forward to. No fun, no treats, no good times; from middle age we will slide into senility with no memories.
• Fatalistic acceptance of things as they are and the conviction that I have done something really bad to deserve this lot. Childish I know!
• Abject and complete failure when at the end of the moth it was impossible to reconcile our budget, our spending and our bank account. Even more seriously there were only two of those to reconcile – our budget and our bank account. We had no knowledge of our expenditure.
As I said at the beginning, my first budget was a disaster. In retrospect I was not ready to take charge because:
• I did not know what I need to know;
• I did not have the information one needs to set a budget;
• I did not have a norm against which to measure what is ‘normal’ for us; and
• I did not have the information necessary to take action.
These are the four elements forming the backbone of the Money Principle. By now I am well versed in each of these but I still don’t believe in budgets. At least not in the ones that set spending levels and impose them thus restricting life.
What is your experience of budgets?