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How to Stick to Your Budget in 5 Simple Steps

Feb 03, 2020 5 min read Emma Siemasko

Key Takeaways

  • A budget doesn’t have to negatively impact you.
  • Saving toward an emergency fund is a worthwhile goal.
  • Don’t put off saving for retirement.

 

The word “budget” used to make my skin crawl. I associated it with restrictions, like a diet for my life. But these days, after experimenting with a number of strategies, I find it empowering.

Now I’ve realized that having a budget can actually alleviate stress and provide room for flexibility in my spending. After all, if I know I have the money to splurge on a pair of shoes, then I don’t feel guilty about the purchase.

I’m not alone — the word “budget” can set off alarms for many people. Some of us actively avoid creating and maintaining a budget, while others have one, but struggle to stick to it.

 

 

Here’s how I’ve changed how I think about budgets — and a plan that you can make your own.

 

1. Redefine how you think of a budget

For years, I figured that if I made a budget, I’d wind up saying goodbye to my local coffee shop, shopping on the weekends, and going out for dinner and drinks with my friends.

The first step in budgeting is to redefine what it means for you. Budgeting doesn’t have to be something for rich people with hundreds of thousands in the stock market. It doesn’t have to be something you hear about on TV. Most importantly, a budget doesn’t have to negatively impact you.

You should think of a budget as a way to make the most of your money. Budgeting sets you up for big life goals, such as getting married, buying a house, or getting out of debt. It also allows you to live the life you want to live — a life where you’re not stressed about money, and able to do the things you enjoy most.


2. Set up a system…once

I used to have a boss who meticulously cataloged everything he spent. Even when he went out to buy a sandwich at the office, he’d update a budgeting spreadsheet.

This might work for some people, but to me it seemed awful. That’s why, if you hate budgeting, it makes sense to set up a system, check in on it on a weekly or monthly basis, and live your life in the meantime.

For example, you might decide that you’re going to track all your spending through an online account, which automatically categorizes purchases into various categories. When you set up the account, you’ll add in fixed costs, such as your student loan and car payments. Then you’ll add in variable costs such as the amount you’ll spend on groceries and eating out at restaurants.

Once you’ve set up your system, you can set aside 20 minutes per week to check in on how you’re doing.


3. Save toward a goal

The cool thing about money is that when we’re smart with it, we set ourselves up for the life we want. For example, if you want to propose to your significant other with a diamond ring, buy a house with a backyard for your pup, or pay off your student loans, budgeting can help you do it.

Even saving toward an emergency fund is a worthwhile goal. Unfortunately, about 40% of adults said they could not cover an emergency expense of $400 without selling something or borrowing money, according to a 2018 report of The Federal Reserve Board.

However, if you’re saving toward a goal, that means that if your car gives out tomorrow, you don’t have to get into a panic about how to afford that new transmission.


4. No matter what, throw some at retirement

Saving for retirement? Yeah, that seems like one of those things you can just put off. Turns out, the earlier you start saving, the better. So when you turn 70, you’ll be much better positioned to buy a yacht in Florida, if you want.

Unfortunately, about one in three non-retired adults have no retirement savings or pension at all, and 56% have $10,000 or less in their retirement accounts, according to a survey conducted by GoBankingRates. This means most of us aren’t doing the best job saving for our future. The best course of action is to put something — anything! — into a retirement savings account.

If you’re living paycheck to paycheck, you should make sure some amount of each payment goes toward saving for retirement. If your employer provides a 401k, this can be done automatically, but if not, make a point to do it yourself.


5. Set up a budget that works for you

Everyone is different, so the budgeting system that works for you might not work for me. Not only do people make varying amounts of money, live in varied types of environments (rural, urban, suburban), and have differing family situations, but we also have different personalities.

Here are some strategies that may work for lots of people:

  • Cash only — Believe it or not, people spend 12-18% more when they use cards rather than cash.
  • Automated spending tools — There are many online tools for automating your spending. You can also set up automatic transfers within existing bank accounts: for example, automatically moving money from a checking account to savings.
  • Personal goals — Goals can be extremely motivating. If you want to save up for a down payment on a home,  position yourself to do so. Rather than coming up with a vague goal, such as “I’d like to save $5,000,” come up with a way to make your goal come to fruition, such as setting aside $250 per month.

 

 

What you can do next

Confront budgeting head on, and learn about the things you don’t understand. A great place to start is at the bookstore or library. Today’s financial writers are doing a great job demystifying finance to make it understandable, approachable, and decidedly unintimidating.

 

Emma Siemasko is an entrepreneur and freelance writer who is building her own consulting company. She loves sharing the non-traditional financial lessons that she’s learned along the way.

 

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