The Beginners Budget: What is the Cost of Your Dream Life?
Intro
As much as we may not like to admit this, we all have biases in life that hinder our progress. For those of us looking to always improve, we can’t completely rid ourselves of these biases, but we can learn to control and manage them.
In this blog post, we will be exploring a simple, yet powerful exercise you can do right now that could change your life.
Simplification
In business, I have lost track of how many times I have heard the advice of “just simplify”. After all, it's fantastic advice. Typically, as we see more complexity come into our lives, more problems arise.
A typical exercise I have completed multiple times in the name of simplification is to look at what I currently have and strip it down to the bare necessities.
For a business owner, this may look like concentrating your marketing efforts on the ones that give you the most ROI.
For others, this may be cutting back on unnecessary expenses.
Although very valuable, this still leaves us liable for biases.
In both examples, you have a list of things and data associated with those things. And one by one, you will cross things off your list. The trouble with this is that you are comfortable to a certain extent with those items on your list. Crossing something off may bring back feelings of guilt for doing something that didn't work. Or, you may not cross something off due to some emotional attachment to that item.
The Beginners Budget
It comes in the beginner's budget.
In basic terms, a beginner's budget is one in which you start from scratch. Instead of starting where you are and crossing things off, you start with nothing and build your budget that way.
This isn’t a surefire way to get rid of biases, but it can be a big step in alleviating them.
It also allows you to dream. Most budgets start with your income, take out expenses, and allocate the remainder.
A beginner's budget has no income to start with. It's simply asking the question, where would I like to spend my money if there were no limitations?
Quick note, as much as I am a big advocate for dreaming big, putting down a mortgage big enough for a mansion or a Ferrari will likely defeat the purpose of this exercise. So dream big, but be reasonable.
Where to Start?
Simple and easy is the way to go here.
- Spend some time understanding, at least from a general sense, what your dream life is. I always recommend to surround yourself with those you love and go to a different environment (a short drive will do).
- Next, use this “template” and fill in our cash flow desires. Remember to dream and not consider these numbers according to what you currently can afford, but what you would like to afford.
- Don’t worry about the nitty gritty such as interest rates on a mortgage payment. Just be general.
- Discuss what you see with your loved ones.
- What is surprising?
- How do you think this compares to your current spending?
- What ideas come to mind for you to change your current situation to align with this?
- Lastly, compare this with your current cash flow and make a plan to move towards your ideal budget. In my experience, when most people do this exercise (as long as they're being realistic), they realize that they are much closer to their dream life than they thought. Sometimes, it just takes a little awareness and intention.
Summary
Do you remember when you were little and you had some wild dreams like becoming an astronaut or a baseball player? And all of your friends had similar dreams?
But as we got older, society told us to become realistic and start developing skills to be an adult.
Well, I believe these societal norms went too far. It restricted our ability to dream. To have fun. To live our best life.
The beginner's budget won't magically lead you to your dream life, but it's a good first step to bring some awareness into your situation.
