Real Women. Real Life. Real Finance
Welcome to another Miko’s Moments.
This past week I talked briefly about a thought I had after coming home from my short trip to Vegas – my ability to go an entire week without looking, worrying, or stressing over my finances.
Now, many people would tell me that I can do this because my budget is efficient. It operates on its own, gives me desired results with little to no effort.
When people talk about their budget, one thing I hear most often is our desire to make our budget as EFFICIENT as possible. What we don’t hear very often is making our budgets effective.
Here’s how I make the distinction between the two. Efficiency is doing things the right way. Effectiveness is doing the right things. So if something is effective, it produces the results we want. If it is efficient, it is functioning with the least amount of effort or resources.
For example:
Sally decides she wants to save as much money as possible. She sets up an automatic savings transfer for $1,000 to savings every single month. Sally made saving money efficient.
Bob decides he also wants to save as much money as possible. Before saving money, Bob takes time to clarify his goals. He makes a plan and prioritizes the goals that are the most important to him. He sets up automatic savings transfers to his top two priority goals, for a total amount of $1,000.
Sally has found a way to save money with little to no effort. She has the same amount of money to save as Bob but doesn’t have a clear purpose for her savings.
Bob, on the other hand, has a plan and strategy. He spends more time clarifying and prioritizing his goals, but that effort pays off with more value. Bob is saving for things he defined as the most important. He focused on the value, not just on making the process quick and easy.
Efficiency and effectiveness are not mutually exclusive. When you are managing your money, effectiveness should always be your priority. From there, you can develop ways to make your method more efficient. The truth is, it doesn’t matter if you have the simplest and easiest way to budget if that budget doesn’t align with your goals and doesn’t really work in your life.
You first have to learn how to budget, even if that budget isn’t optimal. So much of the time, I see people sacrifice effectiveness for efficiency. This is a mistake. Doing all of the right things with your budget poorly is way more important than doing all of the wrong things well.
When I hear people say, “I just use this app to track my spending because it’s easier,” or “I just want my budget to be simple,” I think to myself, it’s not simple or easy that you want. Even though we all hope to get to a place where it can eventually become that, I think what they really want is a budget that works.
So, when I thought about my ability to go long periods of time without worrying or working on my budget, it’s not because I focused on making my budget efficient. It’s because I focused on making it effective first.
I will back next week for another Miko’s moment. Have a beautiful weekend.
