If you think budgets are scary, daunting and only tell you everything you can’t do with your money, we feel you.
Thing is, though, the only way to really maximize your money life — jetting to Cairo guilt-free, or nabbing that Coach bag without maxing your credit limit — is to simply know where your money is coming and going. And that all starts with creating a solid budget, which you can do (and even enjoy) with these tips.
Step 1: Assess Your Budgeting Aversion
Before you can build a budget you love, take a hard look at why you haven’t been able to keep one in the past, says Colleen Lennon, a licensed clinical social worker and financial therapist with Symmetry Counseling in Chicago.
For example, do you struggle with compulsive shopping or find yourself living beyond your means every month? Maybe stress at work leaves you turning to the aisles of Sephora for solitude, or you’re feeling insecure about a pal who just got a major raise, so you’re spending money you don’t have to keep up with her social life.
Whatever the case, reflect on what's going on in your life, and how you can address these issues in healthier, non-spendy ways.
“Look at the issues you’ve had with budgeting before, and see where the disconnect and the emotional elements are coming from,” Lennon explains.
Step 2: Start with Small Changes That’ll Stick
It goes without saying that you’ll have to look at your numbers first to see what your spending has been like so far.
Try the one-number strategy, a simplified plan that categorizes your monthly spending into four main buckets: fixed costs, financial goals, non-monthly expenses and flexible spending.
After you see the numbers in black and white, determine which areas you can pare back to give more breathing room for others. For example, could you downgrade your cellphone data plan by connecting to Wi-Fi at home? Free up that expense and dedicate it to boosting your emergency fund, instead.
Whatever you do, don’t try to knock down your spending all at once.
“You can't train to run a marathon in one month,” says Philip Olsen, CFP®, founder of The Art of Finance in Austin, Texas. “If you're going to set goals and shift your habits, start with bite-sized goals, like a 10% to 20% shift or less. If you can do that, then maybe you can crank up the intensity next time.”
Step 3: Make Room for the Fun Stuff
It’s easy to equate budgeting with deprivation. But keep in mind, a money plan isn’t just about paying the bills.
“To most folks ‘budget’ means a set of handcuffs,” Olsen says. “It means you're going to have less fun, do less things you care about, have less freedom. But I encourage clients, think about what you could do if you were in control of your cash flow. Tell your money what to do instead of wondering where it went off to.”
So while it’s a given that you have to pay your student loan bill, you can plan brunch with the gals or a monthly facial into your budget, too. You may not be able to do everything all the time, but including these expenses into your flexible spending amount — so long as they don’t thwart other necessities — can make your budget work for you.
Step 4: Build Up a Tracking Habit
Now that you’ve set a budget, check in with it every now and then.
Olsen advises his clients to compare their budgets with their goals for the month once or twice a week. He suggests using a budgeting app or online financial tool to track your spending.
Lennon adds that when you can physically see your savings swell or your debt dwindle, that’s positive reinforcement. Plus, you should be proud of what you’ve accomplished along the way, not just of meeting your end goal. “Even if [you’re reducing your debt by] $1 a month, you're making progress, and that’s the point,” she says.
Step 5: Treat Yourself for Milestones — or Even Just Because
Speaking of progress, build in rewards for your achievements to help you stay motivated.
“Go have dinner or do something special, because this [milestone] is something special too, and it shouldn't be skipped,” Olsen says. “Spending $100 or $50 occasionally is not going to sink your whole budget. In fact, it will probably give you an emotional boost.”
Step 6: Tag a Friend
Having a comrade in arms to keep you accountable can help you stay on track, says Olsen.
If you don’t have a financial planner or you don’t live with someone you budget with, ask a friend or family member who practices good money habits to check in on you once a month. Sit down with them over coffee and show them your budget — not to have them judge it, but to show you did it. Their encouragement can boost confidence and remind you how good being in control of your finances feels.
Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.