Revisiting Your Goals and Priorities
As you go through the budgeting process, you may find yourself revising your long-term financial goals and your shorter-term spending priorities. This revising doesn't make you a bad person! It's just the reality of everyone's situation: We each have a set income, and our desires to spend exceed our income.
Suppose, for example, that you have the following goals: Save for a small down payment on a house in six months; buy new furniture for your house when you move in; and within two years, increase savings so that it equals six months' worth of income. You also have your eye on buying a new car in a year, and you've recently added this to your list of goals.
Suppose that with your current income, you spend everything you make. Well, in order to save $10,000 for a down payment on a house in six months, you're going to need to save roughly $1,500 per month. The furniture is going to cost $500 for six months, saving six months' salary is going to require $900 a month for two years, and the new car, minus the trade-in on your existing car, will take $1,200 a month for a year. Altogether, this is $4,100 a month.
Unless you're currently living an incredibly lavish lifestyle, the chance of being able to cut $4,100 out of your current spending to find this money is slim.
You have two options. You can find a way to make more money by getting a second job, doing freelance work, starting your own part-time business, working overtime, or finding a new job that pays more money. That is one way to meet your goals, but keep in mind that whenever you work more hours, you give up something very precious — time.
If you have the time to spend, if you are planning to work the extra hours only for a short while, and if working more hours isn't going to jeopardize your health, wreak havoc on your relationship with your kids or spouse, or take you away from a hobby that you love, perhaps it will be okay. But if you have to commit to this lifestyle for 10 years, you may find it unacceptable.
Isn't re-evaluating the same thing as selling out?
Not at all. Re-evaluating isn't unusual and doesn't mean you've sold out. Instead, it's the only way to generate a budget that will actually work for you in the long term.
The other option is to go back and revisit your spending priorities and financial goals. Even if you've cut your expenses as much as you think you can, maybe you can still cut back some more.
Even if one of your spending priorities is to be able to talk on the phone for an unlimited amount of time with long-distance friends and relatives, perhaps you could talk during free weekend minutes or switch to e-mail part of the time.
Or you may decide that because your financial goals are very important, you're willing to give up this expense, even if you've previously decided that it was a high priority.
On the other hand, you may decide to re-evaluate your goals, to look for changes there. Perhaps, for example, you decide to buy the house in four years instead of six months, which gives you much more time to save for the down payment and the furniture. Perhaps, because both the house and the phone calls are important enough, you can make do with your existing car for several more years. Perhaps you keep working toward getting six months' salary in the bank, but stretch that goal out to 10 years instead of two.
