What is Big Picture Budgeting and how can it help me?
Big Picture Budgeting is an approach to budgeting that looks at your income as a whole rather than a paycheck. As the name implies, it’s about looking at the big picture. This allows you to get out of the mentality of budgeting paycheck to paycheck and into budgeting by level of income. Budgeting by paycheck typically causes you to focus on the now instead of the future. This may lead to short-sighted decision-making rather than long-term decision making. Big Picture Budgeting is about looking to the future and planning long-term with your finances while accomplishing short-term financial goals.
My Journey to Big Picture Budgeting
When I was in my early 20’s, I was not very good with money and was typically living from paycheck to paycheck which was bi-weekly at the time. This meant that I was only paying down debt or saving money whenever I had some extra money leftover from a paycheck. I was constantly thinking about what bill was coming next and worrying if I was going to have the money to pay for it. Looking back on it, this was an incredibly stressful way to live.
It wasn’t until I got a job that paid monthly that I got out of living paycheck to paycheck. The new pay schedule forced me to make a change when it came to budgeting. If something unexpected were to happen it’s not like I could just wait another week to get paid. On the new schedule, it could be up to a few weeks since it was only once a month, and who knows what else could have happened in that time-frame.
When starting to budget by the month, I became more aware of how I was spending my money which allowed me to better forecast my monthly expenses. With knowledge as my power, budgeting became easier and more money was being allocated to debt and savings. Over the months, I was able to develop a new approach to budgeting and it was a step towards this Big Picture Budgeting concept.
The next step towards Big Picture Budgeting was when Liann and I became serious about becoming debt-free. Nothing is easy about becoming debt-free, but with my newfound budgeting approach, we were ready to accept the challenge. When tackling our debt, I was planning months into the future with our budgets and took on more of a macro view of our finances rather than the micro view of living by each paycheck. This is when I discovered Big Picture Budgeting and it was glorious! While day-to-day budgeting, also referred to as micro budgeting, is still an important factor in Big Picture Budgeting, it is more of a means to an end rather than being the sole purpose. Consider it as the journey rather than the destination.
What Big Picture Budgeting is All About
Big Picture Budgeting is about looking to the future and planning long-term with your finances. It is planning months and years into your future with your current income. But the thing about the future is that it is unknown. This is also why Big Picture Budgeting is flexible and easy to change. If something unexpected happens like getting injured or job loss, then you adjust your micro budget to meet your macro budget. Likewise, if you come into a sum money or you get a raise, you adjust your macro and micro budgets to meet your new financial goals.
Benefits to Big Picture Budgeting
- Provides a bright future through long-term financial planning.
- Increases understanding and closeness with money.
- Allocates money effectively to achieve goals.
- Allows for a flexible budget.
- Reduces financial stress.
- Supports both consistent and inconsistent incomes.
Cons to Big Picture Budgeting
- Requires more dedication than alternative budgeting approaches.
Adopting the Big Picture Budgeting mentality really catapulted my understanding of money and personal finances as a whole. Big Picture Budgeting is about having a rich mindset rather than a poor mindset. If you haven’t heard these terms before:
Rich Mindset – Understanding that the first goal is to gain a surplus of resources and then use that surplus to accelerate things.
Poor Mindset – Immediately sees a surplus as an opportunity for consumption and inflate lifestyle.
Read more about this on Listen Money Matters
How I Use Big Picture Budgeting
Even though I am back to a bi-weekly paycheck, I budget using my entire monthly income. In addition to that, I am budgeting an extra month in advance along with keeping up with an annual budget. As an example, it is currently the end of July but I already have my August budget planned and a “skeleton” budget for September. A “skeleton” budget is basically a budget with all fixed expenses and investments already allocated for, meaning when September hits that money is already out of my account. If there is a significant change in my forecasted expenses or income, the first thing I do is adjust my monthly budget to account for the change. This change almost never affects my macro budget.
Goals Change Over Time
Goals change over time which means your Big Picture Budget will change over time. For instance, last year Liann and I were budgeting more for trips and savings. This year we have largely increased our saving budget and are focusing heavily on our investments. Change inherently is not a bad thing, so don’t be afraid to change your budget to meet new goals as long as you keep the Big Picture Budget mentality.
I love Big Picture Budgeting and believe people will benefit greatly by adopting it. We did after all.
Comment below with questions or to share your experience with this type of long-term budgeting approach.