Sure we all know that we should be budgeting, just as we all know we should be eating healthy and exercising regularly. But most everyone will tell you that the benefits of budgeting begin and end with saving money, bringing up images of restrictions and guilt, stopping most in their tracks before they even begin. Thankfully, this is not the case. So if not strictly saving money, what’s the value of budgeting? 

Clarity. 

The most obvious yet most overlooked part of budgeting is keeping track of one’s expenses. This is often not given any direct attention. It is merely seen as a means to an end, a metric checking if you are actually following the budget, and yet it’s benefits are worthy enough to stand on their own merits. 

By tracking your expenses you start exercising a new level of awareness over your spending behaviours. As we have moved further away from cash, the experience of spending has become increasingly abstract, minimising the psychological impact. It has been proven that the negative reaction parting with cash has, is diminished when paying with a debit card and almost non existent when paying with credit! This is further amplified with the integration of contactless payments. This removal of money’s tactility makes it easier to spend without considering the amount, or the value of the transaction as a whole. Small value transactions are then made with no consideration and pile up over the length of the day. 

When paying with cash, an extra coffee, a bus ticket or an afternoon snack would each be felt. As they stack, they limit what else you can do in the day, or at least until you reach a cash machine. The same transactions made with card or contactless are only ever seen on an individual basis and so can be completely dismissed. 

Keeping track of your daily expenses offers you the opportunity to see how these small transactions stack! With this type of clarity you can start recognising their individual value. Make the choice to get an extra coffee a conscious one and make sure it’s worth the value you’re paying for it as you may need to make a choice between this coffee or an extra snack on your way home. And here we can see the further value of clarity. 

Habit tracking. 

Yes, budgeting can be an excellent introduction to habit tracking. How “one off” are the impulse purchases you are making? Keeping track of them can help you detect overarching repeating behaviours you may have otherwise dismissed. 

This may be that occasional trip to McDonalds you tell yourself is just on seldom occasions, but when you start keeping track it averages to two trips per week, or the extra pack of cookies you get for the road when you get groceries. Developing this knowledge of your own behaviour can help you be conscious about your actions. 

If you detect habits you are not proud of, you can start setting realistic boundaries. By knowing the current frequency of your behaviour, you will have a good frame of reference to use as a metric for feedback on your efforts. If on the other hand you stand by your actions and are not looking to change them, with this level of foresight you can better plan for them. You can see if it’s actually worthwhile buying in bulk, or getting that loyalty card you’ve been eyeing up.

You can even take this introspection to the next level by seeing how your spending habits correlate to your mood and external forces, by using different journaling methods such as a bullet journal you can start to see what effect your habits have on your mood overall. This will allow you to value them on a deeper personal level. It might be that taking a coffee break halfway through the day is exactly the moment of decompression you need, or it could be a distraction that adds nothing to your day. This is something dependant on you, and only through tracking it over time will you fully be able to take advantage of it. 

Prioritisation.

Finally, once you’ve tracked your expenses over a few weeks you have all the information at your fingertips, not only what you are spending on but also what you value, and what value everything has to you specifically. Now you can start making informed decisions. Maybe your daily starbucks adds up over a couple months to pay for a weekend away. Once you have the concrete information you can start making actionable goals, setting specific targets. Make a savings pot, either manually or through your bank and pay into it whenever you would have normally had that starbucks coffee and name it something direct like “Weekend trip to the highlands”. This will not only reassure you each time you save, but as it’s built on an understanding of what each action is actually worth to you it will sting less as an action. Weighing the personal value of each transaction to yourself. Choosing not to get that uber instead of cycling can be a decision you make after weighing it’s value to you, rather than a rule forced upon you by a budget. Remember, if you set your budget based on your own spending, you can choose what you prioritise, as long as you make an informed decision you can make the most of your money, by spending on what truly adds value to you, and this varies between people.

In conclusion

Of course all paths of budgeting eventually lead back to spending your money more wisely, but by understanding you are not just allowed but rather encouraged to adapt and evolve along the way, you can develop  that you will change both depending on your goals as well as your behaviour. not only will it become easier to budget, it will help you grow as an individual. What starts off as a tool for limiting and controlling your behaviour can be used as a tool for reflection, something that will help you take control of your life by developing a deeper understanding of yourself, and protecting you from sales techniques which tend to take advantage of a passive outlook towards spending. By paying extra attention to your actions over a long period of time you can start training your mind to make decisions constantly, and limit the amount of time you’re on “autopilot”. Budgeting is not something that can restrict you, on the contrary, it is what can put you in control of your finances, allowing you to shape them to best serve your needs.

By Alex