Personal Time Budgeting - Part 6
This is the sixth post of six on how to establish and track your Life Budget.
For those of you just joining in, I’ve described in previous posts how to put your personal time into financial terms, establish a budget of hours per week for certain life activities, and then track those activities using financial terms. In this post, I provide some ideas on how to use personal finance concepts to manage your Life Budget.
There are many good posts out there on how to manage your personal finances. Two in particular I like is this one from the Simple Dollar that highlights the key concepts of personal finance on the back of five business cards, and another good one from Get Rich Slowly, one of my favorite personal finance blogs. Both have ideas applicable to managing your Life Budget. I summarize their general concepts below.
1) Spend Less Than You Earn. This is a fairly easy concept to implement in your Life Budget. You can never create more time in a day, so every hour that passes is gone forever. You need to make sure you are working to increase the amount of time you “earn” Life Income (investment in spending time with your children or on your own personal development), and reduce the amount of time spent on non-value added activities like watching TV or mowing the lawn.
2) Reduce Frivolous Spending. In personal finance, a lot of advice is targeted at living frugally by reducing your expenses. The same applies for your Life Budget. Instead of spending a lot of time on tasks that don’t add any value to your life (e.g. watching the latest reality show), ask yourself whether you really should be spending time on it. Does it align with your personal vision? Does it help you move forward on your personal development plan? If not, you’ll see the negative impact as you track your Life Budget at the end of the week. You need to target maximizing every minute of the day. Once you start tracking your Life Budget, you become a lot more conscious of ‘dead time’ during the day when you really aren’t focused on something useful.
3) Pay off Debt. The purpose of paying off debt in personal finance is to free yourself from someone else owning part of your life. This also frees up your income for spending on other things that are more important to you. A similar concept in your Life Budget is reducing the amount of time you spend on required life activities so you have more time for spending with family or pursuing your personal development goals. For example, you might hire someone to do the task for you, like hiring a service to mow the lawn. Ironically, this may run counter to your personal finance goals of reducing financial expenses. However, this is something that needs to be considered if you find that you don’t have enough time in the week to do those really important things.
4) Set up an Emergency Fund. This is another key concept in personal finance. The idea is to save up enough money to be able to cover your expenses for a period of time (typically 3-6 months) in case there is an emergency. Within your Life Budget, the concept of ’saving up’ time unfortunately doesn’t apply. There isn’t a way to bank your time to use at a later time. Use it or lose it! One way to look at the emergency fund in a Life Budget context is reducing the amount of time you’ll need to spend in the future by taking care of something today. For example, if you spend a few hours learning how to do something correctly (e.g. minor home repairs), you will save your self time in the future. If flushing out your water heater once a year will save you the many hours (and dollars) cleaning up the mess in your house when it floods (the future emergency you are preparing for), this is extremely useful time. If you do encounter a real emergency, you’ll also find that many of the things in life that you *have* to do today become an after thought. If your child is sick in the hospital, the last thing you are going to worry about is how you are missing opening night of the latest summer blockbuster. This kind of thinking can help put things into perspective.
5) Invest in the Future. An essential part of any personal finance plan is preparing for the future through investment in retirement and college savings plans. This is exactly the same as the time you spend investing in raising your children, working on your marriage, or working on personal development. Just like with saving for retirement, the earlier you start saving, the better. If you wait too long to start taking care of these things, you’ll have wasted much of your life. This is why you need to focus on these types of activities every week. You’ll never be able to invest enough later to make up for lost time today.
6) Get Educated. To improve your personal finances, it is critical to research different methods for how to meet your financial goals. This includes learning about different investment types, techniques for reducing debt, and understanding the concept of compound interest. This applies to managing your Life Budget as well. There are tons of ideas out there for time management, how to better balance the time you spend on work and life, and ways to invest in yourself and your family for a better tomorrow.
As you implement these personal finance concepts, you may find that even though you have the greatest intentions, you have a hard time sticking to your Life Budget. Brad Isaac’s Persistence Unlimited blog has a good post on typical reasons that people don’t meet their goals. Establishing and tracking your Life Budget is intended to address many of these issues, like not knowing how much time to spend on different activities, not being consistent in how much time you actually spend on activities, and not taking advantage of all the time you have available.
Overall, I recommend not getting to hung up on getting everything perfect, but use your Life Budget as a continual reminder of how you are spending your time. This helps to identify recurring issues in your life where you are not ensuring enough time commitment to the higher priority items in life. It is very easy to lose track by