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Why Budgets Fail

Don Mize
© 2005, Don Mize

In the previous article (
How to Get Ahead Financially), a basic budget plan was
presented to help you better use the cash that actually comes into your
possession each month.  In order to make this basic budget work, however,
each family members needs a personal weekly allowance.  Rather than a
luxury, a personal allowance is essential: a weekly allowance releases the
emotional energy necessary for success.

Simply put, most budgets fail because the emotional need for recreation
overpowers reason.  By limiting recreational spending to your personal
allowance, you satisfy your emotional need while limiting your spending.  
Thus, be sure your budget includes a weekly allowance for each family
member.

Even a small child can receive a dollar a week in order to learn about money.  
In our family, we started giving our son a dollar a week in dimes.  He could see
ten dimes: one went into his piggy bank (savings), one was for church (a
tithe), and he could spend the other eight dimes as he pleased.

Adults also need tangible experiences with money.  By limiting recreation to
your reasonable allowance, you create a tangible experience: you watch your
personal money grow or disappear.  That experience helps you deal with other
forms of money by reminding you that every number represents cash.  Our
son soon learned to evaluate the momentary whim against disappearing dimes.  
Sometimes he enjoyed the new toy he bought for himself, and sometimes he
found the new toy failed to meet his expectations.  The weekly allowance
allows learning without total defeat.

We will have fun.  Recreation is indeed re-creation.  We actually need an
emotional safety valve to release frustration and restore the balance of pleasure
and pain.  We need a sense of control.  However, recreation costs money.  
Simple pleasures like going out to eat, shopping, or renting a movie all involve
some costs.  The money will come either from our weekly allowance or from
the family budget.  A personal allowance allows us release and fulfillment
within the context of financial responsibility.

The personal allowance limits recreation expense while maintaining personal
freedom.  You decide how to spend (or save) your personal allowance.  If that
new truck is not in the budget, and if you cannot buy it out of your personal
allowance, you need to put it off.  You are free to choose whether you would
rather take your family out to eat or save your allowance/recreation money for
something else.  Like hiking in a wilderness, you cannot go north and south at
the some moment.  You must make choices.  In fact, you will make choices.  
Following your budget is like having a compass in the financial wilderness to
keep you on track.

Someone pointed out that we can write a check for $5.00, $500, or $5,000 in
about the same amount of time.  The same is true for signing a credit or debit
card.  No matter how much your income, if you spend more than you take in,
you are about to walk off a financial cliff.  No matter how much your income,
you can find a way to spend it.  No matter how much your income, you can
go broke.

Financial numbers represent tangible assets, whether cash, your home put up
as collateral, or your future income.  The same people who tell you that the
debit or credit card gives you freedom will also repossess your home, hound
you with ugly telephone calls, and pass laws to prevent you from declaring
bankruptcy.  Money is reduced to numbers, but in the end your creditors
expect to possess the tangible assets represented by those numbers, whether
cash, your home, or whatever other collateral you possessed to gain that line of
credit.

How much weekly allowance should each family member receive?  Judgment
is involved where children are concerned, but the weekly amount for each
child should not be excessive and should fit the context of the family budget.  
Expect your child to take care of his/her own recreation, such as a movie a
week, extra fad clothing, or the latest music release.

The amount of the weekly allowance for each adult should be decided in the
context of the family budget.  At times, the amount may be small, but the
emotional satisfaction of having some pocket money is not tied to the amount.  
As you increase your income or pay off some debt, you can increase your
personal allowance (recreation) money.  The important thing is to make the
decision in the context of the basic budget.

One warning to keep you from defeating the whole process: no advances on
the weekly allowance to anyone in the family.  Borrowing on future cash for an
expense like recreation is not smart.  The weekly allowance teaches judgment
and self-control.  If we blow it, we wait until the next weekly allowance.  If
we want to go to a Dallas Cowboy Game, we save the allowance money in
advance.  This approach creates a situation where we balance emotional needs
with reality.  An advance on the weekly allowance defeats the whole process.

No matter your income, you can find a way to spend it.  The secret of
financial success does not lie in how much you make but in how well you use
the cash that comes into your possession.  A weekly allowance in cash gives
you emotional fulfillment, limits your recreational expense, and motivates you
to stay with your basic budget plan.
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