Home finance

How a Budget Leads to Financial Freedom

People who’ve never used a budget – or cash flow plan, as I prefer – usually assume it’ll be restrictive.  They think of a budget as something you go on like a diet.  They see budgets as being about cutting back, tightening the belt, reining themselves in.  For them, budgets are about less.

But a cash flow plan is actually about more.  It provides more knowledge about where our money is going, so we can be more proactive about where it should go, so we have more for what really matters.

For some people, a cash flow plan even gives them more freedom to spend.  That was the case with Sheila.

We Can’t Afford It, Or Can We?

When she married Mike, Sheila was really good at living beneath her means. Even with a relatively low salary, she never worried about not having enough. She always had money in the bank.

Because she grew up as one of five kids with a stay-at-home mom and schoolteacher dad, she knew all about frugality. However, the money she had in the bank gave her no happiness, no warm feelings of financial freedom. She only allowed herself to buy whatever would get the job done at the absolute lowest possible cost.

When she and Mike got married, he had been in the habit using a simple spreadsheet to guide his spending. As they used it to guide their joint finances, Sheila began to see that her automatic response to any spending opportunity—“we can’t afford it”—was based on an unwarranted fear of spending.

Seeing on paper that, yes, in fact, they could afford it—whether it was a restaurant meal or a better brand of clothing—gave her a sense of freedom around money she had never experienced before.

Getting Started With a Budget

If you’ve never used a budget before, give it a try.  My Budget Quick Start Guide will get you going.  I’m confident you’ll find that a budget is not constraining or restrictive; it’s actually incredibly freeing.

In fact, I believe it’s the single most powerful, practical tool for successful, joyful money management.

If you use a budget, do you agree that it has given you a greater sense of financial freedom?  If you don’t use one, what holds you back?

Know someone else who would benefit from this article?  Please forward a link.  And if you haven’t done so already, you can subscribe to this blog by clicking here.  Two or three times a week, you’ll receive ideas and encouragement for using money well.


5 Responses to How a Budget Leads to Financial Freedom

  1. Matt Bell July 28, 2011 at 3:04 PM #

    Hanna – You’re not alone, believe me! Getting started with a budget, or just about anything challenging for that matter, is usually tough. Here are two ideas that may help.

    The first one you already mentioned: accountability. It will help a lot of someone else you know wants to start using a budget. You can spur each other on.

    Second, make sure you have some motivating reason to use a budget. Using a budget is not a goal anyone is excited about. But when the use of a budget will get you somewhere you want to be — out of debt, on a special vacation, etc. — then doing the work required of a budget is more appealing. So, come up with something you really want that using a budget will help you get.

  2. Hanna S July 27, 2011 at 2:28 PM #

    Matt, I try and try to get on a budget…but can’t seem to start….I do great for about a week or so…and then needed items come up that need to be purchased and I am out of money..so out comes the card….I am really desperate to start something and be accountable to someone about this….
    Love your website…encouraging….but have not started.

  3. Matt Bell July 27, 2011 at 10:19 AM #

    Dan – I love an honest answer!

  4. Dan Boone July 25, 2011 at 2:21 PM #

    What holds me back from using a budget? Not wanting to face the reality that I’m spending too much on frivolous items (Ebay, Books, Comics, etc.)

  5. Dennis July 25, 2011 at 10:24 AM #

    Matt, I absolutely agree with your point that a spending plan provides wonderful freedom. It’s also a useful tool for clarifying a person’s or a couple’s values in life, for our values are expressed in our choices of spending, saving, and giving. Something I’ve often heard from you and from others is worth repeating in this context: A valid spending plan includes both (A) a written listing of income and outgo categories and amounts and (B) a tracking (accounting) mechanism to ensure that one follows the plan. This needn’t be a complex thing–even a very simple spending plan can do the job well. I hope more people will come to experience the freedom that such a plan provides!

Share This