“Handle money better” is always a top New Year’s resolution. But somewhere between the last piece of confetti falling and that romantic Valentine’s dinner, you’re back to spending money like Richard Pryor in Brewster’s Millions. We all want to be better with our money. We understand how much that credit card balance is costing us each month. We know we should be saving money for retirement, college, and a rainy day, but…have you tasted Starbucks’ White Chocolate Mocha?

2023 can be different. This year can be the year you follow through with your resolution to handle money like a pro. The difference may be simpler than you think. Just a change in perspective can give you that extra dose of discipline to help hold the line when the urge to spend wells up.

THE BUDGET

Budgeting gets a bad rap! It’s often thought of as restrictive and masochistic; a prison to the free spender. However, the budget is the key to regaining and maintaining control of your income. The budget is a contract with yourself, if you are single, or between you and your spouse about how you want to spend your money. It is your plan to get you from where you are to where you want to be financially. Finally, the budget is an X-ray that helps you determine the health of your plan and where it needs improvement.

THE BUDGET IS A CONTRACT

Okay. Maybe “contract” is a strong word. Lawyers aren’t involved in drafting a budget. But a budget is an agreement; a written agreement on how the month’s income will be spent. All parties are involved in negotiating how much is dedicated to needs and wants and how much is earmarked for giving and saving.

What is the significance of viewing the family budget as an agreement? When you enter into an agreement, you have given your word that you will do something and do it in a particular way. To break that agreement is to break your word. So, if you have agreed to spend no more than $50 on coffee in January, when January 29th rolls around and you are craving that latte, but you’ve already spent $49.62 for the month, you have a decision to make. Will you buy that drink and satisfy your craving, but break your word in the process? Or will you deny your craving and instead hold to your commitment?

THE BUDGET IS A PLAN

At work, in volunteer organizations, with kids’ activities, when a group of people want to reach a goal, they put together a plan. Organizations map out, step-by-step, how to reach the goal. The more important the goal, the more detailed the plan and the less that is left to chance.

Your budget is a plan; your plan for reaching financial goals and goals that require the use of your money. Your budget covers goals from the simple, “I don’t want to starve this month,” to the more complex, “I want to retire when I am 65.” To reach these goals, for example, you set aside money for groceries and deposit contributions in a 401(k) and/or IRA account each month.

This plan helps keep the immediate from interrupting the important. When you have spent time first thinking about your financial goals and then mapping out a plan to achieve them, they become real and personal. Then, when, for example, a friend invites you to catch up over dinner, you’re more apt to suggest grabbing dessert instead; same conversation, less overhead, and you’re still on track.

THE BUDGET IS A FINANCIAL X-RAY

When you draft a budget for the first time, you typically start with the previous month’s spending, collecting loose receipts and reviewing bank and credit card statements. As you organize these individual expenditures into budget categories, you will likely have a few eureka moments. “We spend how much eating out?” “We are only saving how much for retirement?”

Each month you will review the previous month’s budget like a doctor examines an X-ray. The budget tells all. Reviewing the budget will show you where you overspent and where you met your goals. You will use this information to make adjustments in the next month’s budget. The budgeting process then creates a beautiful planning/feedback loop. This feedback loop acts to constantly bring your spending in line with your values and goals.

From this new perspective, viewing the budget as an agreement, a plan, and an X-ray rather than a straight jacket, you can glean a few mantras that can be used to further steel your resolve:

• “I made a commitment.”
• “Is this in my plan?”
• “Does this help me achieve my goals?”

Find a mantra that resonates with you and repeat it to yourself in moments of weakness.

BUDGET TOOLS

Armed with a new perspective on budgeting, are you ready to get started? All you need is a budget worksheet or app and a little time!

If you like to put pen to paper, budget worksheets are the way to go. Simply Google “budget worksheet” and you’ll find the template that best suits you. Starting out, it is good to do your monthly budget on paper. It is easier to share and discuss the budget when it is on paper.

Once you have the hang of it and the budget becomes routine, budget apps are convenient. You can log expenses in real time and you always have your budget with you to consult when making purchases. There are lots of quality budget apps available in the App Store. Here are just a few.

• EveryDollar – The best budget app on the market. The free version is all you need. The premium version allows you to connect to your checking account and automatically download transactions.
• NerdWallet
• YNAB (You Need a Budget)
• Mint

As you get started, here are a few pointers on budgeting:

• Create the next month’s budget late in the prior month. You need to be ready to go with a fresh budget on the first day of each month.
• Budgeting is “zero based.” This means that you start with your income at the top and by the time you finish entering the last category, you have $0 left to budget. Still have money left over? Go back and add this extra money to a debt payment and/or increase your savings category.
• Your first budget will be horrible. Your second budget will be horrible, but not as horrible as the previous month’s. Keep going! Even in the midst of a less than stellar budget, you will find you are spending with intention and making progress on your goals.
• Create a “spending money” category. Budgeting doesn’t require complete denial. The “spending money” category is intended for those small pleasures throughout the month (coffee runs, vending purchases, etc.) that keep you focused on the long-term goals. The “spending money” category can also be valuable in persuading a skeptical spouse to give budgeting a try. How much should you put in this category? YOU get to decide!

With a new perspective, a few mantras, and the right tools, 2023 will be the year you start spending according to your values and begin achieving your financial goals. You will enter 2024 on solid financial footing ready to pick a different New Year’s resolution!