Posted by Lending Club :: March 25, 2009 @ 6:53 am

When most people hear the word “budget,” they immediately think of sacrifice and cutbacks. In reality, proper budgeting can actually let you spend much more on the things that are important to you.

The goal of tracking your finances and following a budget is not solely to get you to spend less, but rather to get you to spend better. Once you know where your money goes, you’ll be able to make decisions about whether or not that allocation makes sense for you. While your goal may be to cut back spending by a certain amount, that doesn’t mean that every category will have to face that cut. You can totally eliminate wasteful spending and use the savings to increase spending in other categories.

What’s wasteful to one person is not necessarily wasteful to another. We all know that eating out costs more than cooking at home. But if eating out is something you really enjoy doing, there’s no need to cut back on that expense. To reduce your overall spending, while maintaining (or increasing) your budget for dining out, you’ll simply have to make up the difference in another category. Perhaps with all the time spent out of the house, you’d choose to downgrade from premium to basic cable. That savings could then be added to your category for eating out.

While the goal of budgeting is typically to spend less, or save more, that can often be accomplished without a sacrifice in the amount spent on activities we enjoy. Cutting the things that make you happy will end up doing more harm than good. Using the possibility of spending more on the things that make you happy as motivation to eliminate spending on things you could care less about is more likely to bring success.

In the end, we only have a fixed amount of money to spend each month. By shifting money spent on unimportant things to those that matter to us, our money is put to better use even if the total amount spent remains the same. If the process can reduce overall spending, that’s an added bonus, but it doesn’t necessarily have to be the priority in following a budget.

Has budgeting freed up money for you to spend on your interests?