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Living with intentionality moves us from point A to point B, like a ship sailing toward the X mark upon the map. Intentionality with your resources gives you the optimum potential for living your dreams and reaching ever higher levels of capacity, influence, and opportunity. This is the ultimate function of your budget.

It’s easy to assume that budgeting is a phase of life that can eventually be outgrown. While growing income and building wealth makes it easier to live without a budget, there is still a reason to budget regardless of your economic status. Your ship must always have an eventual destination, even if you’ve gone out for a leisurely sail!

How to Construct a Budget

To put it in mathematical terms, let’s consider the law of diminishing marginal returns. We enjoy certain material things and don’t enjoy others, but we also like things in optimal quantities. The Greeks made famous the term “Nothing in excess,” engraved on the temple at the ancient site of Delphi.

This ancient wisdom proves true today: any material thing has its ideal amount beyond which it becomes too much, and the positive feeling we experience from one additional factor of that thing declines with each new instance of it.

Human desire is not a science we can break down to pinpoint the exact optimal quantity that is right for you; in the same way, no one can scientifically create a budget that is the most efficient use of your resources. It is something that must be intuitively derived.

Because the future is unknown, there is not a risk-free way to perfectly balance the present and the future; it is a statistical guess, but still one that needs to be made.

What is important is to keep in mind that everything is a tradeoff. Even if you have a large surplus at the end of each month, there should be a reason and a place for the use of that surplus. The reason may simply be to save until a reason comes along for it, but there should still be a plan in place to offer the ideal risk/reward scenario while its ultimate purpose remains in limbo.

Make a List of Goals

• When generating a budget, making a list of goals will provide you with the foundational material by which to think through and prioritize the use of your cash flow.

Breaking those goals down into short-, medium-, and long-term goals will bring the perspective into greater focus.

You may be among those fortunate enough to find they are already living their ideal life. Maybe you want very little, if anything, to change. If that is the case, then your main long-term goal may simply be to live a sustainable lifestyle so that the present can continue on into the distant future. The short-term goals might be very similar to the lifestyle you are already living. In that case, you might have the opportunity to focus on more short- and medium-term goals so long as you have a broad plan for allowing its sustainability over the years.

Maybe you are content with where you’re at, but if you had the capacity, you might expand your activities to something greater. This might mean that you have the work-life balance presently that you desire, but you dream of one day starting your own business, establishing a charity, or buying into a franchise. Even if you have a large cash surplus in the present, it’s important to pay attention to the trade-off of goals so that you optimize, to the best of your ability, the fulfillment you derive from each element of spending.

That entails, first and foremost, having a solid, detailed plan of how you intend to reach the long-term goal. You may eventually discover a better or faster way to pursue this goal, but use the knowledge that you have at present to determine how you will go about achieving the goal and when you expect to achieve it. Then deconstruct the plan into an annual, and even monthly, plan.

Within this plan will usually be some degree of saving, except in a case where there is some sort of asset that can be sold or inheritance that will be received.

Determine how this money will be saved: in cash, in a certificate of deposit, in a bond, in a stock, in a fund of one or the other or both?

• What could derail the plan?
• What could cause the target date to be extended?
• What are you willing to adjust in your own lifestyle to deal with the unexpected?

Balance the Goals

Take a look at your expenses and savings, and categorize them under one of your goals which have been listed. Note which expenses might be progressing you toward one or more goals. As much as possible, allow the fulfillment of your short-term goals to motivate you and accelerate you toward your long-term goals.

Even if you’re taking a sabbatical for a rest and recharge, let it also be a time of self-reflection that raises your perception, allows you to reassess your priorities, and helps you adjust within your mind what your perfect lifestyle might look like.

But also notice if there are certain expenses that are taking up more than their fair share of your resources. Ask yourself, are there any expenses that are not really adding significant value to your life experience? Are there any that remain expenses almost as a leftover out of habit and lack of attention? If you find something which can be eliminated, what might you estimate the future value of that amount to be, assuming it were invested toward those long-term goals.

Cutting one expense may not have a big future value potential, but the sum of habitual expenses from just a few categories certainly can!

But there is a power of breaking micro habits and establishing new and better habits which go almost unnoticed and unappreciated until time has run its course to produce the harvest.

It is this small turn at the crossroads which causes two roads that appear almost parallel to end up in very different places at their destinations.

Conclusion

Naming the purpose for each of your dollars is the pathway to continuing toward the free and meaningful lifestyle you wish to live.

Remember that there can (and should!) always be a category of “fun money.” That allows for spontaneity and surprise in the spending habits.

Like controls on a cruise ship, keeping each dial within its proper parameters will help conduct you safely where you truly want to go. It is an excellent and objective way to stay on the same page with a spouse or other household member, and it provides metrics for whether you are moving toward or away from your ultimate goals.

Most importantly for the present, it provides a guilt-free mindset that remains at peace, knowing that the enjoyments of today are easily affordable without sacrificing the future. And that future grows brighter with every good decision today!