Budget-Building Tricks That Actually Work
The paradox with a budget is this: The less money we have, the less likely we might be inclined to make one—but the more we really need to buckle down and create a tracking system for how we spend.
I tell my clients creating a budgeting system that works for you is one of the most important parts of your savings plan. Once you’ve got an emergency fund rolling, your next step should be to find a budget system that works for you.
What should that look like? The good news is, it can look like just about anything.
Choose Your Weapons
When it comes to budget systems, there’s no wrong answer.
Some people like the envelope method, where you pay with cash (which helps you emotionally connect to your spending) and keep a set of envelopes for things like mortgage, food, shopping, gifts, fun, and so on. When the envelope’s empty, that’s it for spending in that category for the month.
As a financial planner, I have software with a platform that has a budgeting feature, which I like for our clients.
If you aren’t yet working with a planner, I recommend sites like mint.com; it’s great for more hands-off management. Personally, I’m a nerd and pretty hands on, so I use Excel spreadsheets for myself—but the important thing is you find what works for you and stick with it.
In order to make any method work, however, first you have to track your spending for a month to see where your money is actually going and how much you’ll need to allocate, so be sure not to skip that step.
If your budgeting efforts start to stall, consider this: Budgeting has very real psychological benefits.
In the beginning, creating a budget can be anxiety inducing or even embarrassing (I spend WHAT on eating out?), but once you’ve gotten started, it leads to reduced stress and anxiety.
You can see where your money goes. You have a plan. You can find opportunities to save, and decide where to splurge.
As you get more comfortable and your stress reduces, you’ll find how much getting your finances under control can impact your wellbeing—everything from blood pressure to your qualify of sleep.
Make sure your budget has some goals and rewards built in. Simply “saving as much as possible” won’t motivate you the way working to pay down a credit card or save for a vacation will.
The best budgeting secret weapon I know of is positive reinforcement. Although I’m a financial planner, a lot of my work feels more like counseling. It’s really important that my clients feel encouraged, and I’ve seen that the most beneficial change comes from positive reinforcement.
I help them focus on how budgeting and saving will benefit them, and what they’re going to get out of it. And no matter what goal we’re working toward, we simultaneously put a little money aside for pleasure.
When you treat financial planning as a puzzle, you find it’s an opportunity to get creative. It shouldn’t be like going to the dentist! You should walk away with things you feel you can take action on.
And the best planning helps you feel both more secure AND find joy.
Need help finding a budgeting system that works for you? Connect with an advisor today.