As a certified money coach and personal finance author, I’ve seen just about every version of budgeting that you can imagine; families with an entire section of their kitchen countertop full of jars individually allocated to categories such as school fees and groceries; highly complex spreadsheets secretly downloaded from the corporate finance division at one’s place of work; an allowance system where one partner controls the money and pays the other a weekly allowance; and my least favourite, retroactively budgeting where individuals beat themselves up about what a terrible job they did with their spending the previous month, and then promising to do better going forward.
If you think these systems are absurd, you’re right. None of them work.
Budgeting will not fix overspending problems and that’s because overspending is 100 per cent behavioral. So, until you carefully examine why you behave the way you do with your money, no budgeting tactic will work.
Here are the best ways to shift your spending mindset so you can find a better way to budget.
Put every dollar to work
Every dollar in your bank account needs to have a job. Otherwise, it will be wasted. Take a moment to create a list of jobs for your money such as groceries, line of credit payments and utility bills.
Vision next week
How would you like your next week to go? For most of us, that means going to work, paying bills, buying food, hitting the gym, spending time with family and friends and enjoying some entertainment. Now, put a price tag on those activities.
Do you have enough money in your bank account TODAY to afford next week?
If the answer is no, then plan for a less expensive week. Choose activities that are free. Use gift cards to pay for your groceries. Use up leftover soaps, shampoos, toothpastes and makeup.
The best budgeters in Canada, who also happen to be self-made millionaires, like David Chilton (author) or Ann Kaplan (entrepreneur), know meticulous details about their monthly expenses and plan their spending with money they currently have in their bank account.
Base your budget on what makes you happy
Your weekly budget should reflect the things you love. If you’re like me and love to cook, buy great food. If you love cross-fit, buy a membership to a gym that motivates you. If you love the idea of owning a home someday, put money into a savings account for a down payment.
If your money is going to willy nilly things that you don’t absolutely love and will use immediately, stop spending on those things.
Love yourself enough to save
Put saving for your future at the top of your weekly budget. If you don’t, you’ll struggle financially and emotionally. At the beginning of my week, specifically on Tuesdays, I automatically transfer money into my RRSP and TFSA. And, because I’ve paid myself first, I can enjoy the rest of the week knowing I’ve contributed to my future.
If you’re drowning in debt or have limited cash flow, start small by saving $20 per week. You can grow your savings as your cash flow improves.
Don’t overcomplicate the process
The more simplistic you can make budgeting, the better. Personally, I use Google Sheets for my weekly budget planning. But, there are other user-friendly tools such as You Need a Budget (YNAB) or Mint.com, that sync with your bank account to track spending against your budget and savings goals. By identifying spending trends and savings goals, personal finance apps like these are great way to use technology for better financial stability.
Related Content: Four Budgeting Hacks For Parents
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