BUDGET. What a gross-sounding word. Just the thought of making a budget sounds painful. Honestly, this is probably why people don’t often learn about (and are so terrible at) budgeting.
But as repulsive as the idea of budgeting can be, it’s a necessary and extremely beneficial part of our financial health. Just by clicking on this article, you’ve swallowed the pill of embracing more financial responsibility, you’re looking to curb spending habits, and you want to live within your financial means and build a financial future for yourself. So, cheers to you for being here, and hopefully, we can make this a little more interesting by getting rid of the boring numbers and focusing on the psychology behind creating (and sticking to) a budget.
4 Psychology Tips to Help You Start Saving Money
Budget for Your Future Self (Self-Concept Theory)
- Take some time to think about your financial goals. Do you plan on working full-time for most of your life? At what age do you want to retire? Do you want to take out a mortgage to pay for your future house?
- Take actions that move you closer to these goals. Build an emergency fund to cover several months of expenses in case of a temporary loss of income. Start putting money into your brokerage accounts and retirement accounts every month. Study mortgage amortization schedules to get a feel for how much interest you’ll pay on different time denominations of home loans.
Budget with Small Goals (Dopamine)
– Start small. Unless you plan on winning the lottery, you’re not going to obtain financial freedom overnight. Start by investing $20 a month, then $50, then $100. Cut out that overpriced morning latte and replace it with home-brewed coffee in your favorite mug. Start eating out three times a week instead of four, and improve from there. You’ll be surprised at how all these small goals will favor your bank account!
Budget with Change (Fresh Start Effect)
–Commit to your future self. If you’ve ever tried to commit to a diet, a workout plan, or a strict new sleep schedule, you know how hard it can be to stick to the plan. It’s completely normal to slip from time to time and forget to invest one month or splurge on an unnecessary fancy meal, but at the end of the day, your financial health begins and ends with you. It’s up to you to put in the effort and exercise the discipline necessary to obtain your financial goals.
–Set reminders around tax time, birthdays, new jobs, and big life events. You’d be surprised at how easy it can be to lose track of important dates when you’re running on a busy schedule. Set yourself up for success now so that you aren’t blindsided when it comes time to file your tax papers or shell out some money on a gift for a friend or family member.
Budget as a Human, Not a Calculator
–Convert money into easier measurements. It can be easy to lose track of how much money you spend in a given time period, so stay ahead of yourself by turning dollars into different units of measurement. For example, instead of telling yourself that you can’t spend more than $50 a week on drinks, plan on going out no more than twice per week for drinks.
–Use a budgeting app. There are plenty of apps on the market that can easily track and report how much money you spend. Some will even show you graphs of how much money you spent on different categories of expenses! Some of our favorite budgeting apps are Simple and Mint. Find out what app works for you or use any combination of apps as you see fit.
–Pay in cash. One effective (albeit strict) budgeting method is called the envelope system. Users of this system will set aside their budgeted money for the week in cash, spending the money as planned and ending with no cash for the week. The process then repeats for the next week. Some people even choose to put their money in physical envelopes representing different spending categories, hence the name. This method forces you to either stick to the plan or run out of money. The envelope system may seem restrictive, but it can produce much better results than making a plan, trying to stick to it, and seeing how you did at the end of the week.
At the end of the day, the best budgeting plan is the one that works for you. It doesn’t matter if you lay all your finances out on an Excel sheet or write them down on a piece of paper. It doesn’t matter if you choose to use a creative budgeting app or the envelope method. What matters is that you set financial goals for yourself and actively commit to achieving them. As long as your mindset is in the right place, the savings and the financial relief will follow. So, now that you know a little more about what the budgeting mindset looks like, are you ready to start taking steps toward your ideal future self?
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