How A Budget Can Help You Reach Financial Independence Without Feeling Deprived

I’ve lived two lives as a money-making person: One with a budget and the other without.

While Budget-Free Me (aka Spendthrift Money Slave) had more fun spending on a whim on most things whenever I wanted, I also ended up feeling really shit about money in general, mostly because I felt like it was constantly slipping through my fingers.

Thankfully, all balance and order was restored once I re-instated my monthly budget and later, an annual one.

It felt great to be a born-again Master Of My Own Money (or at least feel like it) after living like a Spendthrift Money Slave for a handful of years, especially once the thrill of owning all those pretty, shiny new things faded into a big, black hole of Junk I Had No Use For And Needed To Get Rid Of.

The first thing that got me doing a 180-degree turn? A change in mindset.

You Are A Corporation.

You really are.

Except that instead of departments, there’s only you. You doing it all for yourself.

Before you dismiss this idea as complete and utter nonsense, think about it: All capitalist, profit-driven companies are headed by a chief executive officer (CEO) and chief financial officer (CFO), both of whom oversee their company’s financial health and ensure that it remains in a position to make payroll and keep paying the said CEO, CFO and their fellow C-suites plus investors (if there are any) piles and piles of money.

To make sure this happens — although it doesn’t happen 100% of the time — companies rely on monetary guidelines that allow them to spend on the resources they need as long as they fall within the limits of these guidelines.

Often, the less spent on these resources, the better. Hence, the budget cuts most of us who’ve worked in corporate environments are so painfully familiar with.

As individuals who spend most of our lives working for money (and the more, the better), we’re capitalist, profit-driven entities ourselves, so why aren’t more of us operating the same way that corporations do given how vulnerable we are to loss of income if we happen to rely on a job for it?

Which brings me to my first point: Having spending guidelines of your own that works is essential if you want to become financially-independent.

But wait. I thought you’d need more convincing than this, so here are 10 more reasons to have a budget in your life.

1. Guilt-free spending.

Once you know how much you typically spend on food, getting around, utilities, rent, etc, you’ll be able to set aside the money for these each month.

What’s left of your take-home can then go to your savings, investments and just as importantly, guilt-free fun spending.

In a corporate setting, this money will typically be set aside for non-essential expenses like company trips, dinners, Christmas parties, bonuses etc.

2. Less stress and anxiety around money.

Giving every ringgit that comes into your bank account a ‘job’, whether it’s paying a bill or working to make more moolah for you means knowing how much you can spend on all the different areas of your life (ie. not having to stress about whether you’ll be able to pay for all these things at the end of each month).

Plus, doing this increases the likelihood of you having left-over cash, which you can then stash away as a buffer for rainy days.

3. It’ll help you figure out your FI number.

If you’re gunning for FI, you’ll need to have a number in mind.

The more specific you are about how much you can save and invest, the better you’ll be able to gauge how much money you’ll need to make, what you’ll need to do to make it, and how long you’ll take to reach your goal.

4. It’ll help you reach FI in less time.

Having a well thought-out budget that you can stick to in the long-term equals predictable expenses and savings, which you can then channel towards your FI goal.

The earlier you start doing this, the more time your money has to work hard for you, the earlier you’ll have compound interest working its magic and the sooner you’ll be able to reach FI.

5. You’ll also kill your debt in less time.

Just like stashing away cash for your FI goals, the more in control you are of your cash flow, the more likely you’ll be to keep chipping away at your debt.

Got a surplus of cash from your amazing money management skills? Using it to pay off your loans early will help you get out of debt even more quickly, provided your bank won’t penalize you for doing this.

6. Mo’ time to make mo’ money.

Personally, having ‘job descriptions’ assigned to every ringgit that comes in and sticking to them for the year saves me a ton of time and energy that I’d otherwise waste on thinking about how much should go where each month.

This is precious time and energy that I can then use to figure out how to make more money as well as how to make the cash I already have work harder.

7. It’ll help nip destructive spending habits in the bud.

If you’ve got a tendency to spend compulsively like I do, having spending limits in place will tell you whether you can buy something that you want or not.

Tip: Being too aggressive with setting your spending limits can make you feel deprived (I’ve been there, done that) and will likely backfire, so be sure to set numbers that give you some breathing room to spend a little more than exactly what you need each month.

8. It’ll give you a solid reason to say “no”.

Got friends, family or colleagues who love asking you for cash but never pay back?

Having a budget in place lets you decline requests with a short, simple and swift “I’m sorry, but I’m on a budget and can’t afford to lend you any cash at the moment”.

‘Nuff said.

9. You’ll have a better idea of your perfect lifestyle.

Not sure what kind of lifestyle you want to FIRE with?

Living with a budget and observing how you do with it over the course of a year or longer should tell you whether you could do with less or to go with a bigger budget bandwidth in the future, especially after you factor in inflation, more medical care costs as you age, etc.

Planning to LeanFIRE? Frugal living probably comes naturally to you and you won’t need as much to FIRE. If you’ve got your sights set on FatFIRE, you’re going to need to have an very generous nest egg set up before you do.

10. It’ll make ‘paying yourself first’ easier.

You’ve probably seen the phrase ‘pay yourself first’ mentioned in just about every article on saving you’ve ever read, and as cliched as it sounds, I can say from experience that this strategy really does work…like a charm.

Done paying for all your monthly essentials (which you don’t have to think about, thanks to your awesome budget)? Pay yourself first by channeling a portion of what’s left into your savings and investment accounts before you splurge on a couple of nice meals, new clothes and the shoes you’ve had your eye on.

Even better, set these pay-yourself-first contributions to happen automatically as recurring transfers to your respective accounts as soon as your salary comes in to save even more time. After all, money you don’t see if money you won’t miss, but you’ll appreciate having it grow.

Once that’s done, give yourself a pat on the back for taking care of your bills, FI goals and shopping in one fell swoop.

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Photo: Nick Hillier on Unsplash