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Many folks think they aren’t good at earning money, when what they don’t know is how to use it.” (Frank A. Clark)

If you have done any reading on budgeting, you have almost certainly come across the problem of the morning cappuccino. It’s that old piece of advice that points out that if you simply didn’t spend R40 at the barista every day, you could save over R1 000 a month. And if you put that money away, just think how much it could grow into!

Quite possibly, this is the worst piece of financial advice ever concocted. Yet, it gets used again and again as if it were wisdom from the gods.

The reason why it’s such a terrible piece of advice is that it is exactly that sort of proposition that turns so many people off even attempting a budget – the idea that managing our finances means denying ourselves things that we enjoy.

This approach is doomed to fail. If we think about a budget as something that will limit us, we will almost certainly never follow it. The far healthier approach – and one much likelier to work – is to rather think about a budget in terms of prioritising our spending.

Reality check

Let’s be honest: we often have to spend money on stuff that isn’t enjoyable. It’s difficult to imagine anyone taking pleasure from paying their insurance premiums or buying a new clutch because the old one packed up.

But this is just how the world works. We can’t spend all of our money on our next island holiday or having dinner with friends. And this is exactly why financial advice that tells people to give up their small pleasures is unlikely to work.

What’s the point of having money if we can do nothing enjoyable with it? Of course, we should be responsible, but we should feel able to spend on both our wants and our needs.

Values-based budgeting

This understanding is leading to the development of a new idea called values-based budgeting. With this approach, you don’t simply list the things that you have to spend money on. You rather start with deciding what’s most important to you.

Of course, this isn’t static. Your priorities will change as your life changes. But think about this in terms of answering the question: “If my income was in kind rather than cash, what would I want to earn?”

There will be some combination of things – perhaps air tickets, clothing vouchers, additional savings or medical aid – that would feel right for you.

Once you’ve thought of these priorities, it’s also important to rank them. What do you most want your money to enable you to do or achieve?

Your priorities

It’s important to realise that this probably won’t perfectly match what financial experts tell you should be important, or what others are doing. But this is your personal financial journey. It has to work for you.

That doesn’t mean that your “priorities” can just be around-the-world trips and shopping sprees. Presumably if you are thinking about a budget at all, that means that you are serious about your money, and so financial security or financial wellbeing must be a priority for you.

Within that, things like insurance, saving for an emergency fund and long-term investments will be important to different degrees, depending on where you are in your life.

Hopefully, through a values-based budgeting process, you will realise that these are actually things that you want to spend money on. And by seeing them as a priority, they become less of a grudge item.

What brings you satisfaction?

Another advantage of values-based budgeting is that it gives you the opportunity to decide where you really want your discretionary spending to go. Why keep your gym subscription if working out isn’t that important to you, and you hardly ever go anyway?

Rather buy that pair of hiking shoes you have been wanting and spend time outdoors, if that’s really what you prefer.

Essentially, a values-based budget allows you to think more clearly about what actually adds value to your life. This could even be that morning cappuccino. So fit it in!

There’s no reason to deny yourself the pleasures that really bring you satisfaction. After all, these are often the things that make you appreciate how your money is enabling you to live the life you want to lead. And that is what money is for.

To discuss how to budget successfully, speak to a professional.