Create a budget. Stick to your budget. Sounds easy, right?

Sadly it’s a challenge for most people so matter how much or how little cash flow and disposable income you have. Last month we talked about healthy financial habits to keep you debt free and budgeting was one of the first and most important elements.

Have you ever tried to lose weight? If you have, I’m sure one of the first things you learned was to write down what you ate. If you did, it was much easier to see where your calories were going and where you were wasting calories. Writing it down also makes you more accountable. Hard to hide those bad habits when you can see them staring back to on the page!

Well the same can be said about budgeting. If you want to achieve your financial goals, whether it be paying down debt or saving for an early retirement, you can’t do it if you don’t know where your money is going.

This isn’t my first blog post on how to create a budget and the importance of a household budget. As I said, this is a challenge for most people so I like to revisit the topic from time to time. You can read Budgeting 101 and Budgeting – sounds fun? on my website for more tips and information.

Today I’d like to focus on the “sticking to your budget” side of things. Why is it we go through all the pain of creating a budget, only to not follow through?

I read this article on the topic recently, and it had a great quote: “Budgeting not only requires math, which is unpleasant enough, it also requires determination.” I’ll admit, I laughed out loud.

But I don’t think it’s the math that causes even the most diligent of budgeters to eventually fall off the wagon,

Why you can’t stick to a budget

The author of this article draws parallels between diet and budgeting, and how both words conjure up feelings of dread, scarcity, deprivation. And it’s true – I’m salivating just writing the word diet and the thought of restriction!

Scarcity brings up anxious, uncomfortable feelings in all of us: this is the last piece of chocolate cake I’ll ever have; I have to give up going to Starbucks to save for retirement. So instead of talking in terms of deprivation and scarcity, Brad Klontz, a psychologist and certified financial planner, suggests changing our approach.

Instead of calling it a budget, why not a “spending plan”? This exercise is not just about changing our vernacular, it’s about changing the feelings of deprivation and scarcity into excitement about our financial goals and how we’re going to achieve them. Even I’m getting excited to put together my spending plan!

While I do suggest you read the article “The Annoying Psychology of Why You Can’t Stick to a Budget”, here’s the few simple steps Kristin Wong, the author, covers.

1. Focus on your goal

First sit down and think about the things you most value and enjoy. So if you want to take a vacation, your goal becomes, “Take a trip to Australia in 2019.” Klontz even suggests creating visual images for your goal. You might change your desktop background to a beautiful Barcelona landscape, for example.

A spending plan focuses on supporting your goals, which suggests you might have some control over your financial situation, and even a small sense of control can be a huge motivator.

2. Assume you’ll overspend

Once you have your goal in mind, build a plan to save for that goal and then crunch the numbers. We tend to be more confident about our immediate spending but become increasingly unsure when thinking about estimates for an entire year.

If you are less restrictive with your spending over the longer term, it will be easier to stick to and you may even have some money left over to put toward your goal!

Also, it’s easier to pay by credit card and debit than cash. Cash is far more visual and seems to hit home for a lot of people. For your discretionary spending (ie. your Christmas Gift allocation), consider using cash. You’ll find it a lot more difficult to overspend with cash!

3. Connect your future self with your present self

If you have a clearer vision of your future self, you’ll find it easier to save for them. According to research, most of us think of our future self as a stranger. Sometimes it’s hard to save for a stranger, especially when times are tight.

Bring the future to the present by thinking about it more frequently. The more relatable it feels, for more you’re apt to feel a propensity to save for it.

4. Break up big goals into smaller ones

While saving for retirement is the ultimate goal, usually that number is a little too daunting for most of us. Think instead in terms of a monthly goal of $500 towards long term savings. This is more immediate and more of a relatable number.

Research shows that those that think cyclically will save 78 per cent more than those that think linearly.

 

For me, paying myself first, was the single biggest game changer for reaching my savings goals. By having money immediately transfer to a savings or investment account on pay day, I don’t even miss it! Of course, I had to know my numbers in order to allocate appropriately. I also have to revisit that number regularly as life factors change (ie. income, financial goals).

Whether you’re saving for a vacation, a Christmas present for your mom, or a down payment on your first home, it is possible!