The art of proactive budgeting

I’ve been thinking about the tools and practices that have made my life easier in the past few years, and one of the big ones is budgeting.

Now, usually when people use the word “budget”, it is met with a lifeless, ambivalent reaction.

To me, however, budgeting has become a word that doesn’t only apply to money.

To me, budgeting is a synonym for words like preparation, anticipation, and organization.

And usually there is no stigma attached to any of these words, because they tend to be indicative of responsibility.

I mean, would you ever really criticize a coworker for being organized?

How about the goalie who anticipates where the puck is heading?

The accountant who has carefully prepared your taxes?

To budget, whether it’s your time, money, or some other finite resource, is a skill that requires you to be organized, prepared, and anticipatory.

To those who haven’t spent a minute of their lives budgeting, these words may seemingly have no connection with budgeting.

After all, when I login to Mint.com, everything is prepared for me.

I see where my money is being spent, and I can visualize my budget with pretty bar charts and graphs.

But to me, this actually isn’t budgeting at all.

Everything about Mint.com is reactive.

“Oh shit, I spent $500 dining out this month!?”

That’s a reaction to something that has already taken place.

Sure, you could argue that having this information consolidated and laid out with fancy visuals is organized, but clearly you hadn’t prepared or anticipated spending $500 at restaurants.

Does this mean that Mint.com is a useless tool?

No, it does not.

But it does mean that Mint.com is not really budgeting.

Enter: Zero-Based Budgeting

Zero-based budgeting will blow your mind once you understand its value.

The concept does require a severe mindset shift, but once you get over that hump it can be a pretty big game-changer.

It has been for me, at least.

Basically, a finite resource must have each of its parts allocated completely before those resources are exhausted.

Let’s use the example of a cake at a birthday party…

If you have 10 guests who all want a slice of cake, you obviously would need to cut the cake into at least 10 equal slices.

This is pretty common sense.

You’d start cutting the cake, with the first slice being no bigger than 1/10 of the cake. Of course, it may end up being smaller or bigger than the next slice if you didn’t actually cut exactly 1/10 of the cake with the first slice.

This is reactive budgeting.

You cut (or allocated) the first slice of the cake, but the next slice’s size will not be 1/10 the size of the cake. It will be a little bit more, or a little bit less, depending on whether you over-cut the first slice or not.

Budgeting proactively would be using the knife’s edge to outline all 10 slices of the cake before actually cutting the cake.

Essentially, you’ve budgeted out the entire cake before you even started cutting each slice, one-by-one.

OK, so maybe this isn’t the best analogy I could have drawn up, so I apologize if you’re completely lost.

The point I’m trying to make is that the anticipation, organization, and preparation are key components to successful budgeting.

I recently realized the power of proactive budgeting when it comes to managing my time.

I’ve been using the Best Self journal for a couple weeks now, and one of my favorite parts of the journal is the daily planner pages.

From 6am-10pm, you are expected to fill in every 30-minute time slot of the day with what you’ll be doing that day.

While this may seem tedious (it is), I’ve found the benefits to exceed the costs significantly.

I don’t waste as much time thinking about the most important things I should be working on sporadically throughout the day.

Instead, I have a roadmap for exactly what I’ll be doing in a day.

And it doesn’t have to be rigid.

If I haven’t budgeted enough time for a certain task and decide to keep working on it, thus encroaching on another task’s time block, that’s ok.

I’m rolling with the punches.

A budget doesn’t have to be punitive.

Good budgets are merely rough blueprints for how we allocate finite resources.

In fact, my definition above sounds a whole lot like the definition of economics, but I digress.

For me, the anticipation part is still a challenge.

Shit loves to fly in from different directions, unannounced.

Dentist bills. Dirty floors that need to be swept. Clothes that need to be washed. Yearly auto insurance premiums.

It takes a lot of practice to anticipate the shit life throws at us.

But hey, I’m personally not gonna stop working at it.

How bout you?

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