Common financial advice tells you to follow a budget, track your spending, know where your money is going, and don’t overspend to someday pay off your debt and have the savings of your dreams.
But I’m here to tell you that’s not always how it works. That “old school” way of managing your money could actually be why you feel like you’re never making headway with your financial goals and staying broke. By focusing on the negative constraints associated with a budget, you’re actually constantly reinforcing to your brain that things are scarce, and you need to conserve resources, when you could be focusing on the abundance of money and financial opportunities available to you.
If you’ve ever dieted, this situation may sound familiar—you restrict calories, workout, drink lots of water, and with any luck, reach your goal weight or fit into your favorite pair of jeans. This method of dieting isn’t sustainable for most of us. For starters, you end up focused on what you can’t have the whole time (food), which makes you want it even more. Plus, you may end up in a pattern where you lose and gain the same 10 or 20 pounds without finding a sustainable solution.
Managing your finances by budgeting works the same way. By focusing on every single dollar or cent that comes in, you end up in a situation that isn’t sustainable in the long haul. For example, for most of us who are trying to aggressively pay off your student loan or credit card debt, that’s not a couple months of financial dieting with a strict budget, it’s years. You need a solid financial plan for the long term that still allows you to live a life you love without feeling the lack…and here’s how you can do it!
Automate Your Money
I’m all about building sustainable, long-term financial habits and systems that work for you and your goals while not requiring you to portion out every last penny you’ve made this month. Instead, you should automate your budget by taking yourself out of the equation entirely.
If you have a paycheck from an employer, split your direct deposit into multiple accounts (savings, checking, and investing), set up your bills to be paid automatically each 1-2 business days after your paycheck.
This leaves you with the money leftover in your account for your discretionary spending—groceries, brunch, happy hour, midnight Amazon purchases, and more! If you don’t have money left in that account, then no brunch until you get paid again, simple as that.
Pick One Big Primary Goal
Once you have a comfortable amount in savings (this could be $500 or $50,000), and you’re wanting to make other money moves like retirement, travel fund, debt payoff, home down payment, etc, pick one of those to be your primary goal and focus.
Pay the minimums towards any other obligations, and focus on paying more than the minimum towards the goal account (a nice place to start is an extra $50 or $100/month). Then every 3 months, increase how much you’re sending that way and continue increasing it every quarter until you’ve achieved your primary goal.
The trick here is to make sure those payments are automated so you don’t have to think about them.
Set and forget, and watch your financial situation improve.
Focus on Making More Money
If you needed to come up with an extra $1,000/month to pay towards savings or debt, would it be easier for you to make an additional $1,000 or cut expenses in your life to “find” it? Chances are the first option would be much easier, but so many of us default to the second option without ever questioning our choices.
The gig economy or side hustle is such an easy and common way to pay our bills and make additional money to offset the increasing cost of living expenses. If you don’t have or want a freelance gig or side hustle, position yourself at work and ask for a raise or look for other employment opportunities with additional pay and benefits.
In my early 20s, I leveraged my increased experience and salary to go from $48,000/year to $80,000+/year, and that big jump was made much more quickly by taking positions with other companies that came with higher salaries, titles, and responsibilities.
Start with bite size pieces
Don’t decide to start saving by putting $400 every paycheck to a savings account when previously you’d been throwing an occasional $100 in there. To use our dieting example from above, that would be like trying to do three workouts a day and barely eat.
You’re going to end up being super hungry and probably eating a whole pizza later that night because you jumped in WAY too extreme. Instead, start with a manageable amount for you and focus on increasing it every chance you get.
In the end, budgeting can make you or break you…so why not make it work for you and your bank account?