Why a Budget is Useless to Your Financial Freedom

Budget, just saying the word evokes tension doesn’t it…

As you can imagine I get many emails about money, wealth creation and investing. With the good folk at Facebook able to track everything you look at, it is no surprise when money related material appears in my social feed or inbox.

This week was no different. However, there was one piece that really caught my eye.

It was about your budget, and the importance of a having one for financial success. Given my personal views on budgets, I had to read more, you know, to see what the rationale was going to be.

The Arguments for a Budget

Over the years, I have seen many arguments for using a personal budget to help you take control of your money.

Here are some of the more popular ones…

Governments and Businesses have them.

Yep, they do, and we all know how well governments go at sticking to them don’t we? But that is not the issue really.

Governments and Businesses have budgets because they have employees, in some cases many thousands of employees.

These employees rely on direction to achieve their job outcomes. Without some financial constraints, governments and businesses would fail rapidly.

The ability to share elements of the budget to their employees enables staff to develop strategy and plans to achieve the financial goals of the business.

Makes sense, right?

The Budget is just the start

This reason for creating a budget is where things start to go a little off track.

The argument is that once you have created your budget, the real hard part has only just become.

Wait, what?

You might know that not many households actually have a budget. If you didn’t let me tell you the numbers are very low.

So why is it that so many households don’t have one? It might just be this argument for actually having one. The HARD work starts once you have created it.

Nobody likes hard work. If it is hard work, and you don’t like the work, why would I create a budget in the first place?? That just doesn’t make sense.

For me, this is the best argument for not having a budget, but I will come back to that point shortly.

A budget is the best way to control your money

This argument suggests that if you are prepared to spend the time to prepare a budget and put in the hard work, then this is the best way to take control of your money…

But is it?

For most people, a budget involves making some estimations of how much you are going to spend on all aspects of your life over a period of time, normally the next 12 months.

Given we are not able to predict the future, there are some guesses made for some items and plans for others.

Once you are done you pat yourself on the back and acknowledge that if you stick to this budget you will have a certain surplus at the end of the year that you can choose to spend or invest.

This all supposes that you can stick to the budget. And remember, that is the HARD part mentioned above.

I don’t know about you, but these reasons are not really presenting a compelling case for a budget.

The Argument Against a Budget

An important distinction to make is that I am not suggesting you do nothing to control your money. Quite the opposite as you will see.

The simple argument against a budget is that it does not assist in controlling your money.

As you read above, the process of creating the budget is just the start, the hard part is sticking to it!

The budget process itself does nothing to control your money, especially if you are the type of person who has had difficulty to date managing your money. So just to reinforce the point, a budget does NOTHING to control your money or spending.

This is why I suggest having a process that actually controls where your money goes.

The Alternative Process

In my 5 Steps to Financial Freedom course I outline exactly how this can be done. If you don’t already have this system, you can rectify this crazy oversight by clicking here.

To take control of your money, you need to have a system in place that automatically allocates your money to the places it needs to go. The process does the work for you.

This process will ensure that you meet your expenses, have money available for unplanned expenses, cover your living expenses and most importantly, allocate money to your wealth generator. It does the HARD work for you.

By automating your money transfers you reduce the risk of overspending on items that don’t support your financial goals. It removes the temptation because you won’t have the money available to you to overspend. The process has taken care of that for you.

The process of automation is what gives you control. Something a budget on a spreadsheet that you likely never look at, can’t do.

Conclusion

What it comes down to is this… you need a plan for your money, that contains a process that removes the hard part. A budget won’t do that, and therefore is useless. It is the same reason why the diet industry is a multi billion dollar market, because a diet on paper is no good to you when you need it most. Budgets are the same.

So if you want to take real control of your money, get your copy of the 5 Steps to Financial Freedom and throw out the budget, it probably isn’t working anyway.

Let me know your thoughts, leave a comment below. Are you for or against a budget?