Getting Back on Budget: How to Escape a Downward Spiral

Laura Shin
Posted

I recently fell off my budget—or, rather, got pushed off by a large, unexpected expense at the dentist’s office.

I negotiated a payment plan so I wouldn’t have to pay more than $1,000 all in one go, but that night, as I was walking home, I became really irritated about the payments I’d have to make for the next few months.

Then, I saw—and was lured into—one of my favorite New York City institutions, the Strand bookstore, whose memorable tagline is “18 Miles of Books.”

That’s 18 miles of used books. Used books are cheap, right? Cheap.

That’s what I told myself as I proceeded to walk out with $75 worth of new reading material.

As I walked home, I thought, “I’m so far down the hole already anyway, what’s another $75?”

Downward SpiralIt turns out that this is a common way of thinking—about budgets, diets (“I already gorged on that cake last night, so what’s a little cookie?”), exercise (I already missed two workouts, who cares if I miss a third?) and more. But a few easy tricks—and our easy-to-use, goal-setting calculator below—can lift anyone out of a damaging downward spiral. If you want to jump right in to calculating how you can undo any damage you’ve done, scroll down.

First, let’s figure out why so many of us fall prey to downward spirals in the first place.

Why We Dig Ourselves Deeper in a Hole

Carmen Wong Ulrich, personal finance expert and author of “The Real Cost of Living,” says that once people fall off their budgets, they feel helpless. “You’re beyond the point of seeing yourself getting out. The pit is so big, it’s exhausting to look at, and that exhaustion wears down your ability to make a good decision.”

It’s a sad fact: Once one financial defeat saps our energy and willpower, we tend to make yet another bad decision, which makes us feel even worse, engendering yet another budget-busting decision, and so on. (A lot of it comes down to the psychology of sunk costs.)

So, how do you reverse course?

Stop dwelling on the negative.

If you brood over how much you overspent, that number will seem bigger and more insurmountable in your mind—which means you’re more likely to do even more damage to your bottom line.

Fake it ’til you make it.

If you find yourself in an endless circle of self-criticism (“I’m a terrible budgeter. I can’t manage money.”), you’re creating a self-fulfilling prophecy. Instead, tell yourself the opposite: “Every day I’m getting better at budgeting. It’s only a matter of time before I’m back on track.” Then, start to take baby steps to get back on budget. Soon, your track record will reflect your inner soundtrack.

(Here are our 10 top spending excuses—and how to squash them.)

Write down your budgeting victories.

Your log might look a bit like this: “Tuesday: I packed my lunch last night, so I spent $3 rather than $10. Wednesday: Needed a new cardigan, nabbed a thrift store steal for $15!” Celebrating each small victory will boost your confidence in your ability to stay the course.

Start logging every purchase.

This will make you conscious of your spending in a hurry. In fact, your budget might benefit from “the Prius effect”: Prius drivers, whose cars display how much gas they are using at any given moment, tend to begin adjusting their driving style to use the least amount of fuel possible. If, when you’re standing in line at the register, you know you’ll have to record that $100 you blew on that cute dress and jacket, you’ll be likelier to leave the store empty-handed.

Anticipate how good it will feel to reach your goal.

Take the amount you’ve overspent (more than $1,000 in my case) and decide how much less you’ll spend each week until you make up that amount. (Say, $100 less for 10 weeks.) At each milestone along the way—quarter of the way there, halfway, three-quarters—celebrate how far you’ve come and imagine how good it will feel when that debt is paid off.

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Offer yourself a reward.

For some people, just reaching a zero balance is enough reward in itself, says Wong Ulrich. For others, knowing that a treat awaits them at the end of the road will motivate them. If you’re in the latter camp, say to yourself, “When I’ve dug myself out of this hole completely, I can treat myself to that new body scrub.”

Project into the future.

If you’re looking to turn around persistent bad budgeting behavior, Wong Ulrich suggests you ask yourself, “What will my life look like five years from now if I continue like this?” If your debt continues to grow, how will that affect your dreams, such as for your future home, your family, etc.? On the flip side, if you envision your ideal future, what does that look like? Find a picture to encapsulate your ideal future (a beautiful home, a tropical beach, your kids smiling back at you), print it out, and put it somewhere you’ll see it regularly. This is what you’re working toward.


Do the math.

Although I was able to work out a payment plan for my big expense, sometimes a financial hiccup means you have to charge it. If that credit card balance is weighing on your mind, break your debt repayment down into easy steps using the calculator below. Wong Ulrich says having a solid plan will make getting out of debt seem less scary and more doable.

You can use the calculator in two ways. If you input a deadline by which you’d like to be out of debt, it will show you how much you need to set aside monthly. If you know how much you can contribute each month toward your debt, then input that number and the calculator will show you when you’ll pay it off. Either way, stick to the deadline or payment plan you come up with—and soon you’ll be able to move on to saving for bigger, better goals.

Get To Your Goal

Goal Amount:

I know my...


Number of months I have

Amount I can set aside per month

Once you’ve determined what amount you want to set aside monthly for debt repayment, head to the Budgeting Tool in the My Money Center. There, enter your new debt payment in the necessary expenses section.

If you found this calculator helpful and want to use more interactive tools to reach your goals, enroll in our Take Control Bootcamp. Through ten days of quizzes, calculators and close scrutiny of your spending habits, you’ll see where you are now with your finances, figure out where you want to go and create a road map to get there.

  • http://fabwtalk.blogspot.com Fabwtalk

    Very good advice as I have been here a couple of times with unexpected medical bills but once you get your mind to focus and not dwell on the negative then everything will fall into place.

  • overcomer

    Try the new program YNAB.com. Helps you stay on track and pay yourself back without feeling helpless.

  • guest

    Wow, 100 a week? 100 a month is probably more realistic in small town USA, but the idea is the same… Been there, done that, back on the “financial” track! Totaly out of debt, pay off the credit cards every month, etc.

    • SwitchHitter

      Yeah, $100 a week is not a very achievable cutback for most, but I think LearnVest likes to work the hip, single-girl in the city angle. I consider myself hip and in the city, but I am not a single girl. ;)

  • http://youneedabudget.com Anne

    Overcomer, I totally agree! I actually work for YNAB. I’m not trying to shamelessly promote, but the entire software/method is dedicated to getting you out of debt, and on to a healthy budget (EVERYONE should use a budget) :) It’s really good at showing you a realistic way of doing it! I use it myself, and recommend it to everyone! You shouldn’t feel guilty if things go wrong while you’re budgeting. You Need a Budget shows you how to adjust, and keep going! It really works! Great for “hip, single girls of the city” and super-moms with 6 kids. ;)  

  • Mariannemate

    Help, are there tools to create a budget for those of us who earn commission only income?

    • rande

      If your commissions come in randomly – use the historic data from a prior year or prior period and allocate funds as if you were being paid monthly. Often when individuals are paid on a less than regular basis, there is the temptation to give into to pent up demand, and just spend what comes in, but it is imperative that you set some rules for yourself and stick to them as closely as possible. So if you make $60,000 a year on commissions but are paid only 3 times a year – you run your monthly budget as $5000 a month and you have to make sure that you put that amount away when you do get your commission check. That is if one commission check is $18,000 – that has to span you for the next 3+ months. And really, if you get the majority of your payments close to year-end, you may want to only budget say only $3000 a month so the $18000 lasts you for 6 months.

  • Tricia Drake

    I think the best way to prevent or stop a downward spiral is to take a small step (even a baby step) in the right direction right away.  Momentum is a powerful force – one bad deed leads to another, but one good deed leads to another too.  

    • rande

      Agreed, even a 1% adjustment in the right direction is an improvement and will get you where you are aiming to go over time, just keep adjusting in the direction of your goal, even if its only 1% at a time.

  • Guest

    free budgeting templates for excel can be found here: http://www.vertex42.com/ExcelTemplates/   this site even has payoff calculators to help get out of debt faster.

  • http://www.smartasset.com/ SmartAssetTeam

    I think you touch on some very important and fundamental issues in this blog.  There is so much more to the number crunching in maintaining your budget than just the numbers, and you hit the nail on the head with the psychology behind it all.  Its all about changing the way you think about it and creating room for yourself to improve and succeed, not just beating yourself up.