Are You a Budgeting Phony?
Are you a budgeting phony? A hypocrite when it comes to finances?
Hypocrisy is not a word that you would typically associate with budgeting, is it? However, when you stop and think about what that actually means, it probably applies to someone you know.
So let’s start out by talking about what a hypocrite is: A hypocrite is one who “acts a false part, or assumes a character other than the real.”
You may be starting to figure out what I mean by a budgeting hypocrite… There are three types of budgeting phonies: the “dead-broke” budgeter, the “YOLO” budgeter, and the “live-for-the-moment” budgeter.
The Dead-Broke Budgeter
This type of person is always complaining about how they have no money. This type of budgeter may even ask to borrow money frequently and then have trouble coming up with the money to pay you back. Yet, ironically, they somehow can afford expensive or luxury (non-necessity) items. Do you know someone who never has enough money to pay bills, get diapers for the baby, or buy gifts for holidays, but has plenty of money for vacations, eating out frequently, and smartphones or other expensive gadgets? While this type of budgeter says they don’t have enough money, the fact is, they probably would have enough money to pay for the necessities if they budgeted for needs first, and wants second…
The YOLO Budgeter
This type of person spends money like it grows on trees—well, because, You Only Live Once, right?! They seemingly have an endless supply of money to buy any and every thing they want. While things may look fine from the outside, this type of budgeter may be building a house of cards that will come crashing down at some point. This can easily happen because this type of budgeter overextends their finances by taking out interest only loans (never paying back principle… until that loan must one day be refinanced to pay principle and interest) and/or maxing out credit cards. Charging it up on credit cards can be fun—until the bill arrives. The budgeter that lives beyond their means will eventually face a day of reckoning.
The Live-for-the-Moment Budgeter
This type of budget is kind of tricky to spot—this may even be you and you don’t even know it yet! This type of budgeter isn’t always telling you how broke they are, yet seemingly makes unwise budgeting choices; nor do they wildly spend money as though they have an endless supply. This type of budgeter pays their bills and makes good money decisions—mostly. The only problem for this type of budgeter is that they have not factored in saving for retirement. With all of the things that can come along in life, it can be hard to set aside money for retirement—which can be 20, 30, or 40 years away—especially when it feels like you need that money now, just to get by… However, getting in the habit of saving, even if it is only $20 a month to start with, will start a very beneficial budget routine for you and your family.
So what do you need to do?
If you fit into one of these categories, you need to make budgeting changes NOW.
Yesterday would actually be better.
But, we can’t change how you handled finances in the past; however, we can make positive changes moving forward to get your finances under control and set you up for a path toward a comfortable retirement.
- Create a budget. This is the first step to getting your finances into order. Know where you are and then set the path forward. This is going to involve talking to your spouse or significant other about money—a potentially very sensitive subject. Before starting this discussion, you may want to read When Not to Talk to Your Spouse About Finances so you can make that conversation as productive as possible. You can also download my free, printable budget to help you organized:
- Treat retirement savings as a necessary expense. Why an expense? Because then you are factoring it into your budget every month as money going out of your bank account. In this case, it is not going to pay a bill, it is going into a retirement savings account—401k, Regular IRA, or Roth IRA. My article, Retirement Planning: Are You a Saver or Spender? goes over why you may be leaving free money on the table if you aren’t currently investing into a retirement account—especially an employer sponsored retirement account.
- Prioritize your spending. For all three of these types of budgeting phonies, mismanagement of finances is the root cause of the problem. Creating a budget will quickly show you the items that are necessary to pay first, and then using the money that you have left over after paying all your necessary expenses (which is called disposable income), to buy the things that you want, but don’t necessarily need.