Recently I came across a post on a public forum that provided a Statement of Affairs (for my readers in the US this is a tool that sets out income, expenditure, assets and liabilities) and asked how does this compare with the budgets of other people. Of course, people jumped on the poster and started offering opinion as to where they can see over-spending. Opinions varied according to how sensible these were; my favourite one has to be a comment saying ‘every month?’ against the modest amount that was set aside for haircuts of a lady and her toddler.
Which brings us to the question in the title of this post. I believe that comparing your budget to this of other people is a really dumb idea for three main reasons.
Your budget is reflection of self
Put like that this appears really straight forward. But it took me a long time to realise that a workable and working budget is not a straight jacket but it is a reflection of self. Proper budgets build on knowledge regarding our spending patterns, preferences that we have a favour and our character that enable particular action (or not as the case may be).
This is why, although it may seem like a reasonable shortcut to take, comparing your spending to other people’s budget or even worse, trying to copy these is the wrong thing to do. There is no getting out of it: your budget is you own and to set it you need to collect the information necessary (keep detailed record of your spending) and analysing it; working out your norms and values (spending priorities) and having the motivation and determination to follow all that with action.
Boring, I know – but priceless as a way of self discovery.
Only you know what you like best
Developing a working budget is to large degree subject to working out our values and preferences; or put in a different way working out our ‘wants’ and learning to master these. These values, preferences and want are uniquely yours and you are the only one who can decide whether and how to finance them.
For instance, your haircut may be rather pricey but a justified expense if it makes you feel better and allows you to fit in your work environment. I, for instance, often talk to high level politicians and research funders who control large sums of money. Cutting my own hair is probably not a very smart thing to do.
Also I like gadgets. Although I have learned to control this ‘want’ my spend on electronics is still substantial. I don’t care much for clothes though.
How you cut the cake, or how you set your budget, is unique to you. If you forget this you are likely to feel miserable.
A good budget is like a warn in shoe
In other words, a good budget is one with which you feel comfortable. It is unlikely that you will feel comfortable trying to force your personality into someone else’s budget. It would be a bit like wearing your younger sister’s clothes; or a straight jacket.
If you don’t feel comfortable with your budget you are probably not going to stick to it.
Do you compare your budget to this of other people and do you think this works?