Six Tips For Sticking To A Budget
“Don't tell me what you value, show me your budget, and I'll tell you what you value.”
- Joe Biden
Many of us enter into a budget with the right intentions - we want to put money aside in an emergency fund, we want to pay off our debts and we want to save for that holiday. But even with the best laid plans, we find ourselves at the end of the month staring at an empty bank account asking, “where did all my money go?”
Sticking to a budget is not easy. It requires more than just a plan. To make a budget work, we need realistic and meaningful goals. We need to change our habits, and quite possibly, we need to change our relationship with money.
Sticking to a budget doesn’t have to feel like you are constantly giving something up - in fact, it can be quite the opposite. Budgets can help relieve some of the mental load and stress about money. I’ve come to think about my budget the same way I think about my to-do list — they’re both systems for organising things outside of my head so I can stop worrying about them.
So, if you’re ready to get a control of your finances, I have compiled my six top tips for creating and sticking to a budget:
Track Your Spending
This is the simplest, but most effective way of starting a budget. You need to understand your spending habits, and in particular your triggers for where you tend to overspend. By tracking your expenses, you will also be able to set realistic goals, which we will discuss in more detail below.
Some people track their spending in an excel document, although there are many apps and platforms out there. Some of my favourites are WeMoney, PocketBook and Canstar. The great thing about these apps is that they automate a lot of the process for you, which takes even more strain out of the tracking process.
But remember - an app is just an app. You are still the driver of it. Find a system that works for you, and constantly come back to evaluate it. Your budget should be flexible enough that you can make changes to it if something isn’t working for you.
Set Realistic Goals
If you set aside a spending goal for your groceries, but you always overspend on that line - change your goal! Be realistic with yourself, otherwise you will end every month feeling like you haven’t achieved what you set out to. This is demoralising and will stop you from maintaining any real change.
I also like to give my goals a name or a purpose. Savings for something in particular gives me more motivation to reach that goal. For longer term goals I also set myself milestones. This still gives me a feeling of accomplishment [and a reward] by knowing that I am making progress in the short term.
Don’t Spend More Than You Have
One of the cardinal rules of a budget is to not spend more than you earn. However, with the growth of “buy-now-pay-later,” we know that people are continuing to spend outside their means.
All debt, even short term debt like BNPL, can spiral out of control. Instead of savings towards your goals, you end up structuring your budget around the repayments you need to make.
If you can’t afford something you want, put it off for the next week. Being disciplined with your budget may be tough at first, but the reduction in stress, and sense of achievement that comes from sticking to your goals, will outweigh any short-term joy you feel from a new outfit or pair of shoes.
The old days of Layby (which some of you will never have experienced) worked well – because the achievement of the goal (paying down the purchase) was matched with the reward (the purchased item). BNPL works in reverse – you can still be paying for the item well after the “buzz” of the new item has worn off. Build your own Layby process – save the funds and then purchase the item. (Surprisingly sometimes you will find that the item may not be that attractive).
Budget to Zero
Budgeting to zero means that when you create your budget, your income minus your expenses adds up to zero. You should have a plan for every dollar - as soon as money comes in, give it a job. Don’t give yourself a buffer or extra padding.
Budgeting to zero doesn’t mean you spend every dollar you earn. On the contrary, it is a great method to start a savings program by working your savings into your budget and to keep that budget flexible so it can change with your monthly calendar and lifestyle.
Sleep on Big Purchases
If it’s not something you need, take a week to think on it. Does this purchase come with a payment plan (e.g. a car loan) that will mess with your budget? Will this throw off your savings? How will this benefit your day-to-day life? Is the benefit worth the cost?
Weigh the benefits here to make sure it’s adding value to your life and not stress on your budget. If after the week you’ve forgotten about it, that’s a pretty good indicator that you didn’t actually need it.
Treat Yourself When You Reach Your Goals
In his book, Atomic Habits, James Clear says that one of the best ways to stick to a new habit is to create a reward system every time you complete the new habit.
So, set yourself a reward. When you reach your savings goal each month, treat yourself to a nice dinner. If you still want that new pair of shoes, make them your reward for reaching a specific milestone of savings goal.
These six tips help me stick to a budget - it’s something I learned when I was younger and have continued throughout my whole life. I still give myself an allowance every week, and as my goals have changed, so has my budget.
My motto in life has been – you can only spend a dollar once. Once spent, you cannot spend it elsewhere.
If you need help managing your cash flow, or articulating your goals, don’t hesitate to reach out to see how the team can help.
This information is of a general nature only and has been provided without taking account of your objectives, financial situation or needs. Because of this, you should consider whether the information is appropriate considering your particular objectives, financial situation and needs.
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