Budgeting: Projection or Prophecy?

by Nora Dunn on 3 March 2010 4 comments

If you follow the ethos of The Secret, vision boards, and generally harnessing the power of our minds, then it may not be a stretch for you to also believe that financial budgeting can be a self-fulfilling prophecy — for better or worse.

I’ve recently finished a full year of living in one place in Australia. Looking at the next year (which I won’t be staying for), I see nothing but financial pitfalls that could — would — will? — rip my finances to shreds. I expect unexpected bills to come in the form of car and home repairs (some already have). I have already seen all the utilities (including phone and internet) go up in price. And truly, I believe the longer you stay in one place, the more money you spend between making yourself comfortable, repairing and replacing things, and adding social or extra-curricular activities to further enhance the experience in ways that you don’t need while initially getting used to your surroundings. The number of financial expenditures I’ve already made in the name of “surviving” (happily, at least) have far exceeded what I was spending on a monthly basis a year ago when I moved in.

But the question remains: is this act of foretelling my financial future one of projection or prophecy?

Am I projecting my finances? Am I using past experiences and a bit of current foresight to project this financial doom and gloom on the horizon? Is it a logical act of budgeting that is showing me the future, and am I simply along for the ride with little influence on the outcome?

Or am I prophesizing my finances? Have I dreamt up these circumstances based on fears and other irrelevant experiences? Have I taken the pattern of increased expenditures that I’ve started to experience, and multiplied it into a prophecy of disaster — one that could become an unnecessarily self-fulfilling prophecy?

Either way, to what degree will my projection or prophecy become a reality? If I continued to give it energy — the sort of negative energy described above — would I bring my own worst fears upon myself? Is it possible that by imploring of the universe “don’t send me a bill, don’t send me a bill,” all the universe hears is the “send me a bill” part and complies? Would the financial failure I foresee become a reality by virtue of solely my state of mind?

Or am I just that good? Do I have enough of a grip on my finances and the harsh realities of breaking the budget to know what the future holds? Will the financial future happen, regardless of my state of mind and the energy I give it?

I’m truly not sure of the answer. Dear readers — you tell me: when you visualize your financial future, how much of the time do you project based on calculations and experience, and how much do you prophesize based on fear or a gut feeling? Do you believe you can affect your financial future with your state of mind?

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Robin

I have had the same thoughts many times. I also wondered if reading all of the personal finance blogs about how to live cheaply might be creating a financial picture that makes me have to watch every penny. Maybe a week without any PF blogs or budget checks is in order..........maybe not.

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Rachel

I base most of my budget on calculations and my personal experience. In most cases I round UP on credit card fees (which are never consistant), electrical bills, monthly fuel intake, etc. I could see how prophesizing would drive someone crazy. That recently happened with me and my banking online. Everything I bought/paid for on the weekend was always "pending" until Tuesday and I would prophesize all weekend about how much was really in the bank. Tuesday would come along and I'd be in the red (even when I kept a spending journal!). I've decided bills are paid through online banking and everything else is cash. From my experience cash is the best way to pay.

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JohnLM

Nora, I learned a different route to financial freedom through two books -- "Your Money or Your Life" and "Voluntary Simplicity." I highly recommend both. Budgeting is only useful when you are starting an endeavor to figure out if you can afford it -- something like, I have $50 in my pocket and the ticket costs $60, how can I make that trip?

Instead, I focus on "conscious spending." I try to know why I'm buying something before I buy it. Sure it would be spiffy to have a cool new surf board, but how many times will I really use it? If everyday, then I'll buy the best I can afford. If 2-3 times this season, then I'll rent... or better yet, borrow if I can.

Or, why do I really need that fancy coffee drink? Do I need the caffeine to stay awake or am I upset over the mistake I made with my friend. If the former, maybe I can make do with a soda or a drip coffee instead; even better, I could take a nap! If the latter, I'd be better off fixing the error with my friend than soothing my bruised ego. It's cheaper and more rewarding in the long run.

Life is full of little decisions, make them consciously and they add up better. Budgets are retrospective or possibly even self-fulfilling (like you write), either way they bring either regret or worry. Do yourself a favor -- plan for your major expenses and be conscious of all the little ones in between... throw out the budget once you know the plan will work.

Nora Dunn's picture

@Robin - Given the variety of information and topics on PF blogs, I'm not sure that staying away will give you the desired effect! Then again, who knows - it depends on what types of articles you're drawn to. Let us know how you go!

@Rachel - I agree with rounding up all your expenses; it's always better to be safe than sorry. And good for you for setting up a spending system that ensures your account stays in the black.

@John - I agree: budgeting is really about establishing your cost of living, and learning to tweak it as necessary if you discover that you spend beyond your means. The article The First Step to Budgeting describes this process of tracking your expenses. From there, you can decide what's possible with the money you earn and the expenses you anticipate.

And I also wholeheartedly agree that "conscious spending" is what it's all about. Think - think hard - about that purchase before you insist that it's a necessity. More often than not there's a few different ways to achieve the same goals.