A Budget with Consequences

Author's Note: I originally wrote this during the government shutdown earlier this year, but thankfully that's now over and I can maintain my streak of not writing about politics.

Budgeting is an exercise in compromise. Compromise is the right way to view it because unless you are really wealthy you never quite have enough money to buy and consume everything you want. Or at least, if you’re like me you don’t. I’m sure somewhere out there is a perfectly content person who isn’t filthy rich and has everything they want - but that’s not me. I constantly find myself thinking things like: wouldn’t it be great to have a new iPad? Just because I want something though, does not mean I buy it. I have bills to pay, mouths to feed and other commitments that all force me to make a compromise, at least for this month.

Let’s take a look at an example of everyday compromise in budgeting: let’s buy a car with financing. Before you sit down to sign the paper to buy a car you have to pick one out. Often you pick one out off of a lot. Your choices are limited by what’s available at that particular dealership. You may decide to buy the blue car that doesn’t have the sun roof over the red one that does because you like blue better. That’s a compromise. When you do sit down to finance it you have choices: a 3, 5 or even an 8 year car loan. Each requires a different amount of money paid for a downpayment and each will require a different amount of money monthly. As you continue the cycle of evaluating your options you are making more compromises, trading one thing for another in the hopes of reaching the ultimate goal: driving away with a new car. Maybe the compromises are big ones like, “This car is too expensive. I need to go get the gray car without the leather trim, instead,” thus blowing up the whole process and starting over. Or maybe the compromises are more subtle, like cancelling your satellite TV subscription in favor of over the air channels to free up more money in your monthly budget to pay for your car loan. Every decision, every step somehow involves a compromise.

Money and goods are in limited supply, and so you’re constantly making tradeoffs between what you have, what you need and what you want. I’ll buy that new chair for my office today rather than the Nintendo Switch I’ve been coveting because I have a limited amount of funds available. I value a comfortable chair I use every day over playing Mario Kart. In my ideal world I’d have it all. No compromise would be required, and it’d be even better if I didn’t have to work for it either. That’s just not the world we live in.

Everyone budgets, even if they don’t think they do. Maybe you don’t have a spreadsheet or fancy app to categorize and track your spending, but you’re still going through the budget process in your life. The loan example earlier is crude budgeting because it’s calculating a decision to spend funds. That’s really what budgeting is, calculating what to spend based upon compromises.

When we attempt to budget without compromise, bad things tend to follow. We buy a car we can’t afford and we default, resulting in it being taken away from us. Or we don’t pay that credit card off fast enough and attempt to buy food and when we have no credit left we end up not able to feed our families. Compromise is ultimately the curb that hones in responsible purchasing decisions. That curb is based off of consequences, which are critical. They are the thing that gives us pause when we don’t want to compromise.

Curbs are good, they keep cars on the road. Curbs provide the external boundaries for our path forward. This is the function of compromise, and our budget is really just that road we’re cruising down from month to month.

Want to hear more budgeting banter? Check out Episode 25 of Life with a Twist of Lemon.

Do you want to get new posts from lemonbytes directly in your inbox? Subscribe today!