It’s that time of year again…Budget Speech, the end of a tax year and start of the new one. That time when there’s so much talk about personal budgeting, making ends meet, and tips on how to save. Are we sick to death yet of hearing how much we can save by cutting out cappuccinos? Do we need to hear how buying a car is not an investment because it’s a depreciating asset?
It’s not that these are bad points in general, it’s just that they ignore the complexity of being human! Real budgeting is so much more than listing income and expenses, making ends meet, or satisfying businesses and our own behavioral fragility with finding extra money for the next purchase we’re told will make us feel good. Forget that idea of budgeting. Real budgeting is true self Love. It’s believing enough in the power of the present, whilst being hopeful, optimistic, and creative of a future that is greater. It’s an exercise in humanity, in what it means to be alive…to appreciate where we are currently, and still dream and plan for a better future state.
For so many years, the idea of homo economicus pervaded our economic and financial manuals. And in so many more disciplines, this same idea of rational self-interest, debit- credit, good-bad, healthy-unhealthy, persists. And then came along the idea that perhaps humans are more complex than a defined set of sequence optimization based on rational choices. Enter behavioral economics and behavioral finance.
And like so many insights, the institutional world was first intrigued, then salivated, and finally (some may say) moved to weaponizing the insight that human behavior often overrides rationality, by aiming their resources at influencing that behavior for institutional gain.
Why then, when it comes to budgeting, do we still hear and see so much of these dry rational statements and tips that haven’t driven meaningful change in behavior? For the most part, the people and institutions that tell us to budget and how to save, are not deeply invested in seeing us be better off holistically or financially… Or even if they are, it’s a lofty idea that is quickly consumed by their shorter term needs. What we so often feel them being concerned with, is how to ensure that we’re still able to afford their product or service; and that we perceive them as caring enough of our wellbeing that we want to spend our money with them.
If we unlearn the past view of budgeting, and reframe it to be an act of humanity and Love for ourselves and family, we can shed the idea that budgeting is about deprivation. In fact, depriving ourselves of resources and experiences that compromise our ability to have joy in the present moment is not a worthy act of financial self-care. So should we just spend all of our money and resources on the present moment and not save or plan for the future… Well this is actually also an act of deprivation… depriving ourselves of a future greater than we have at present, and depriving ourselves of being able to act on our dreams.
The secret sauce of budgeting with Love and true self Love, is to integrate our present and future. This means deliberately choosing to spend our money on those things that bring us most joy and value in the present moment, whilst allowing us to allocate money towards that future version of ourselves that we dream of providing for.
Let’s say you have the choice of buying a bigger home with a pool and garden because you have young children. You want to build bonds playing together as a family, you want to entertain extended family, and have your kids be able to invite friends over for playdates. Now, imagine you were told that it was much better financially to buy a small apartment instead, saving the difference in cost of the bigger house, and enjoying more financial freedom at retirement because of this choice. On the surface, this seems like sage advice that homo economicus should take. But you’re not homo economicus! If you’re a person whose core value right now is quality time with children and family, this scenario would be complete nonsense and, indeed, deprivation. The fruit of your labour (income from your work) is meant to give you the ability to enjoy those core things in life that you value. It would be far more human and loving to spend your money on the home that serves your core value now, and integrate your dreams of retirement or future goals into those plans. We can do this by radically reducing the way we spend on those things that are not part of what we deeply value. For example, in this scenario, maybe fancy cars and trips with friends is not a core value. You could be radical about saving in those areas to still make your future dreams a reality.
I remember a wonderful conversation with dad-influencer, Afro Daddy, where he spoke about how giving to the community and contributing to society was a core value for him and his wife. With this values-based, loving approach to budgeting, they actually make sure to spend more of their income towards this (even if it means spending less on some of the fancier things that weren’t high on their values).
And what if we flipped this scenario around? What if freedom of time and removing work binds are high up on your values right now? In that case, living frugally and building up investments to give you enough passive income to leave formal work would actually be the greatest act of self-love. In fact there’s an entire movement of people who follow a minimalist lifestyle in order to have this freedom of time. And so this would not be deprivation at all but allowing your money to flow to your values.
So, if like us you’re part of the human family (and not homo economicus), we say forget the dry budgets. Embrace Love and self-care in your approach to money and budgets. Bring your values into the mix. Build a life where today is filled with everything of value and tomorrow is a promise, a plan, and an action away from being even greater.
