This morning I met with an aide of my Congressional Representative, Trey Gowdy, to discuss my thoughts about the country’s deficit. As we talked about the deficit and the handling of the fiscal cliff, she mentioned how the country didn’t have a budget. Well, that’s because congress hasn’t passed a budget in the last four years! And, the American people haven’t demanded as much of their congressional representatives, at least not loudly enough. Perhaps we’re apathetic to this gap in service because 70% of American households don’t run on a budget. Somehow, the word budget has become synonymous with unpleasantries, constraint, constriction. It’s become a dirty word.

However, a household budget is a major component of the level of personal responsibility necessary to obtain a secure retirement. It never ceases to amaze me how people don’t budget, don’t find the inner ability to discipline themselves to organize their financial life and then wonder why their golden years are not so golden. So, don’t look at budget as a dirty word. Instead, look at it as your plan to change your life. If you are going to pay off non-mortgage debt and start saving larger amounts of your income, the first step is learning to live within, and maybe even below, your means. Over the years I’ve met a lot of people who are saving enough in their 401K to receive their employer’s match but that match is usually somewhere between 2% and 6% at the rate of $.50 on the $1. Well, friends, that won’t get you to a secure, happy retirement.

Successful businesses all have budgets. At the end of each year, they put together an operating budget based on the current year’s income and spending trends for their business. Then, they follow their progress throughout the next year with a profit and loss statement as measured against the operating budget. They adjust as necessary to remain on target for their year-end financial goals. Now, all of this means being organized and disciplined. Ugh! Organized and disciplined. Really? I can see your eyes glazing over as I type this. But, would you consider working for a business that was being flown by the seat of the managers’ pants? Would you invest your hard-earned cash in such a business? Not likely. Why? Because you’d want to work for a stable company, which would produce a good paycheck for you or you’d want to invest in a company, which could pay dividends or increase its stock value. And, you’d want a company which had a little something left over to reinvest in the company.

In order to change your mindset about budgets, think of your household as YOU, Inc. Your business isn’t to support all kinds of service providers and manufacturers by spending every last dime of your household income. Your business is providing the necessities for life along with a few niceties of life and having some left to reinvest in YOU, Inc. so you can enjoy a secure retirement. Many years ago, when I had only one grandchild, that grandchild was jumping around on the couch next to me. Suddenly, he stopped and looked at me intently. “Grandma”, he said, sounding very serious and beyond his four years, “Did you know a house is a need and a toy is a want?” Out of the mouths of babes! He’d obviously been listening to my daughter, his mother, explain why he couldn’t get a toy every time they went to the store. The plan was to pay for needs first. Whether you’re already retired or you want to retire or even if you want to retire young, the only way to manage your financial life is by having a plan. That’s all a budget is. It’s a plan. It’s a plan for YOU, Inc. Most of us have enough money to meet our basic needs. We end up in financial trouble when we also want the toys and, sometimes, too many toys.

When we started budgeting, I was pretty stringent with the limits. We didn’t have an emergency fund yet. We were just trying to get a handle on expenses. I didn’t understand how a budget has a life of its own. I didn’t understand how sometimes, especially if you have kids at home, something unexpected can pop up and wreck your plan momentarily. So, it took a while to learn that a budget has to be fluid at times. If you have an unexpected expense, the first thing is to look at other items to see if you can re-allocate some money. However, if you overspend on an item over and over, maybe you weren’t realistic about the cost to begin with. Or, maybe that’s a financial drain you need to plug. Our big wake up was what we spent on groceries. Since we both like to cook, finding a new recipe could decimate the week’s grocery allocation. We REALLY like to cook! We plugged that hole by making a list of a month’s worth of meals, shopping twice a month and not deviating from the plan. Now, new recipes had to wait until next month and we offset expensive, gourmet meals with something cheaper. We brown bagged lunches and cut back on our eating out budget. On another note, we eliminated the feeling of being constrained by giving each of us a monthly allowance. We call it our ‘blow money’ meaning we can blow it on whatever we want, no questions asked, no holds barred. This also eliminated 99.9% of the arguments over money. Every budget is unique to your needs. Just be careful not to confuse needs with wants. Conversely, don’t be so stingy with your assessment that you forget needs, which feed your soul.

Whatever you do, make that budget now! Work to internalize your budget into your mindset and everyday life until budget’s no longer a dirty word but an empowerment word.