Today, we’ll be talking about the most exciting, the sexiest, the thrilling-est money topic of all…budgeting!
My goal today is to help make budgeting not-so-boring and and maybe even, dare I say, fun!
Instead of focusing on specific ways to budget, or apps and tools that can make budgeting easier, I think it’s important to first think about why budgeting is so hard and dreadful. Maybe if we can change how we think about budgeting in the first place, when we do talk about the tools available to us, we might actually be excited to use them.
So why does just hearing the word “budgeting” make us want to jump off a cliff? Why does budgeting have to mean zero fun? I mean, there’s a reason why about 60% of Americans don’t use a budget!
Budgeting sounds like deprivation. Best case, I get this mental image of some scrooge, pinching pennies. Worst case, it feels like Oliver Twist begging for soup. It also feels like a lot of work. Like, am I seriously supposed to track everything? And think about how much money I have left to spend on food or fun or whatever it is every day, every time I spend money? There’s just no way I’m going to do that. I’ve tried. Multiple times. And I’ve at most lasted maybe…a week? And then I’ll get derailed here and there (or just bored of it, to be totally honest) and soon enough, I’ve completely moved on from whatever budget I had tried to set for myself and given up on budgeting entirely.
I think a lot of us think about budgeting the same way we think about diets. It’s really restrictive, you hate it the whole time, and all you can think about are the things you’re not supposed to be eating. You barely see results after a week or two and by that point, you’re so hungry that all you want to do is inhale an entire pizza. As an appetizer.
As a lot of you may know, research has shown that diets don’t really work in the long term, because as soon as we start restricting ourselves, all of that food that we’re not supposed to be eating is suddenly looking extra tempting. Same with budgeting. We focus on all the things we’re not supposed to be spending money on, feel restricted…and then correct it by doing the exact opposite: spending our money! Like an endless cycle of failed diets. Not that I would know anything about that…
So why is budgeting so important anyway? First, it helps us take stock of where we are financially. We are forced to list out how much we make each month, how much debt we have, and how much savings we have. Even just being aware of these things, instead of ignoring them, can nudge us towards actively thinking about money which then leads to making more positive financial decisions. It also makes us think about not only how we spend our money, but how we want to spend our money. Of course, there are things we have to spend our money on that we probably don’t want to — like rent and other bills, but budgeting helps us create different categories of how our money gets distributed every month. How much is going towards food? How much is going towards that service you pay a monthly fee for but completely forgot about? How much is actually going towards savings?
Ultimately, the purpose of budgeting is not to limit your spending, it’s to maximize the money you’re putting towards your goals! It’s a way for us to not only set financial goals but also larger life goals, and use that as motivation to stick with your budget!
And look. I know hearing that might not make budgeting any less scary. And you know what, to be honest, we will make mistakes! At least, I am definitely going to make mistakes. There will be weeks and months when you first start out that you might stray from your budget, forget to keep track of things, or even give up – just momentarily, of course. And most likely, we won’t get our budget right the first time. Maybe not even the second time. It might take a few tries — and even more months before you feel like you have a budgeting process that is working for you and not against you. But no matter how many times you fail, that doesn’t mean you have to throw it out the window completely!
Even if your budget isn’t 100% perfect, it’s still better than having no framework or no guidelines at all.
When we first set up our budgets, just like a diet, something that is overly restrictive or painful will not last! Otherwise, we (or at least I) will be pigging out on that entire pizza appetizer in no time. So don’t be so hard on yourself! This is definitely a skill that needs practice, dedication, and discipline. I’m not going to pretend like it’s going to be all fun all the time, or that budgeting will make all your money troubles disappear. But, it’s a really important starting point to keep us on track as we move towards our goals.
Even if your budget isn't 100% perfect, it’s still better than having no framework or no guidelines at all. Instead of focusing on what you CAN'T spend money on, focus on where you want your hard-earned money to go. What are you excited to spend money on?
So now that we know why budgeting is so important, how do we stop dragging our feet and feel motivated to actually create a budget? Maybe the key to budgeting is focusing on what our money is going towards instead of what it’s not going towards, and why we’re even creating a budget in the first place. We’re not making a budget to make everyday life more restrictive. We’re making a budget so that our hard earned money is going towards our goals in the future!
I have a friend who talks about the cost of things in terms of hours worked. For example, if you make $20/hour, how many hours of work went into paying for that new TV or weekend bar tab that maybe you didn’t actually really need? This helps him think about what he is really working towards every single day.
Which brings me to my next point. Here’s something interesting that I learned recently: Research has shown that neurologically, people view putting money into savings the same as giving money to a stranger. Part of the reason why budgeting, saving money, or sticking to our money goals can be so hard is because when we think about our future selves, our brains react to it as if we are thinking about a totally different person! People who showed the greatest neural activation differences between thinking about their current selves vs future selves also showed a higher tendency to choose instant gratification over delayed gratification, even if the delayed reward was larger. Basically, that means your brain processes setting money aside for Future You as setting it aside for a total stranger…which understandably, you don’t feel happy about (to put it mildly). On the other hand, those of us who feel more connected to our future selves make better financial decisions for those future selves.
So how can we bridge that gap? I think most of us think about the future to some extent, but how do we make that picture less of a hazy dream and more of a concrete image?
A study from New York University showed subjects a digitally aged photo of themselves at age 70. Their theory, in part, was that this would force the subjects to create a more vivid and concrete image of their future selves at a distant retirement age instead of relying on imagination, and therefore they would be more likely to set money aside for their future selves. They were right! In fact, the subjects who were shown their 70 year old selves saved twice as much for retirement as those who weren’t!
Now, I’m not saying that we all need to go and create aged photos of ourselves (although there’s probably a Snapchat filter for that). But when we think about our budgets, let’s focus on what we can spend the money on (whether it’s right now or 40 years from now) and be excited about that, instead of focusing on what we can’t spend our money on. That means we need to be really clear and specific about our values and our goals. And visuals do help here! If you’re a vision board kind of person – or even if you’re not – this is a great opportunity to visualize what you want your future to look like! Maybe you really want to take a trip in the next few years. Having the visual images of the trip, like the specific sites you’ll see, where you’ll stay, what you’ll eat, and finding ways to get yourself pumped up about that trip can help motivate you to put money aside for future you to have a blast! If you think a vision board is hokey, make a list. There are lots of ways to get creative with this!
While we’re on the subject, think about what your ideal retirement looks like. Maybe you want to be able to have a big house with plenty of room to host your family and friends, or you want to spend your retirement traveling around the world. By making the details of how you want retirement to look more specific instead of this random 401(K) that you feel obligated to send your money away to, it can help you not only be more motivated to put money towards Future-Retired You, but even excited for what Future You will be able to do with that money! You’ll understand that not only do you need to put money towards your retirement, but you’ll actually want to put that money towards, say, spending your retirement biking through the vineyards of Southern France.
Some other ways to stay on track with budgeting is by breaking up the end goal into smaller steps or making short-term goals to bridge the gap to the longer term goals like retirement.
For example, if your goal is to take a big trip in the near future, maybe the first mini-goal is saving up enough money for the flights, then for accommodations, then for other adventures, until you have eventually saved up for the whole trip!
Or, if one of your short-term goals is to pay off your credit card debt, think about how awesome it will feel when you finally see that balance at zero! That definitely calls for celebration and a reward for yourself! And it doesn’t need to be a material reward. Maybe you reward yourself with a full weekend of pigging out with your best friends.
Which brings me to another way to hold yourself accountable. Researchers from Harvard studied how peer pressure could help with saving money over just individual willpower. The participants who had to meet with a peer group once a week and show proof that they were contributing to their savings account saved twice as much money as a different group of participants who didn’t have an accountability group! If you’re struggling with sticking to your budget goals, it could be helpful to find a friend or some other supportive group of people that you can set up regular check-in times with, create clear goals with, and most importantly, aren’t afraid to share your mistakes with (and vice versa!).
And finally, some of us may be using retail therapy as a substitute for…well, therapy. Just like how inhaling an entire bag of Milano cookies will ultimately only make you feel worse in the long run, overspending will do the same! If you find yourself overspending a lot or turning to shopping whenever you feel bad, it could be helpful to take a moment to be mindful and think about what is causing the negative feelings that are causing you to spend, and find more helpful ways to deal with it, whether it’s talking it through with a trusted friend or family member, starting a meditation practice, or beginning therapy.
Lastly, and this is important, I’m not saying that I think we should categorize all spending as good or bad. Like, spending money on fun or superficial things is inherently bad and only spending it on bills or saving money towards specific goals is good. Sometimes you really need to eat that extra slice (or two) of peach pie on a day where everything has gone wrong, and beating yourself up about it just negates the deliciousness of it and ultimately makes you feel worse, until you spiral into the guilt and negative feelings that you can only solve by eating the entire pie….No? Is this just me? My point is, I think we can build in room (literally, as in create a small spending category) for both forgiveness and rewards as we start working towards our newly visualized and detailed money goals!
Maybe I’m high on my own supply, but I’m actually kind of excited to create a budget now that I’m thinking about all the things I can use my money for!
Personally, one of my short term goals is to build up my emergency fund, and I’m headed to the store now to buy a nice bottle of celebratory wine for when I achieve it. And I might also get some Milano cookies. Either way, I’m feeling inspired to think in more detail about what I really want my future to look like – 5, 10, and 50 years from now, and I hope you are, too.