I’ve put off writing about the topic of budgeting for some time now, probably for the same reasons that most people hate talking about it. Budgeting is boring, inconvenient, and restrictive. Aside from all that, many get to a point where they don’t feel they need a budget, because they’ve always found a way to make things work without one.
Time for a story.
Nicolas Cage was once one of Hollywood’s highest-paid actors, earning upwards of $150 million in just a 15-year span of his acting career. To his detriment, he was also a big spender. An internet search of his most extravagant purchases reveals the following:
- Ferrari Enzo – $1 Million
- Several yachts, one of which was valued at $20 Million
- Live octopus – $207,000
- 67-million-year-old Dinosaur skull – $412,000
- Over a dozen homes, including a haunted mansion in New Orleans valued at over $3 Million
- Finally, not one but TWO European castles – does it even matter how much?
Ultimately these lavish purchases, along with millions of dollars owed to the IRS for unpaid taxes, would result in foreclosures, forced liquidations, and a serious hit to his once-massive net worth.
Most of us don’t need someone to tell us that two castles might be too many. My reason for sharing this story is to emphasize that any amount of money can be easily spent, or overspent. Our resources are finite, but our desires are infinite. This is true for everyone.
An organized spreadsheet likely wouldn’t have saved Mr. Cage from his financial troubles, but a little more self-awareness and humility might have.
Instead of tracking trends in your monthly expenses or bucketing costs into categories, what you need is an acute awareness of what your lifestyle costs and whether that is reasonable for you.
Understanding this, strip the word “budget” from your vocabulary. The path that leads to success with your money is far more behavioral than it is numerical.
And if you struggle to assess your cost of living in light of your income and resources, or if you’re uncertain about the outlook for your retirement, this is the crux of a well-developed financial plan.
That’s why we’re here.