Cost Management Sticking to a Budget

Many people recognize the great potential of budgeting to turn around their finances and lead to a lasting improvement in their monetary well-being. However, of those who turn to budgeting, a great many fall by the wayside and therefore don’t end up benefitting fully from it. There are many reasons why people give up on budgeting. Perhaps they simply find that their life is so busy that it’s a struggle to keep up their focus on budgeting. Or maybe they lose sight of why they choose to start a budget, or find that their lifelong spending habits prove hard to break.

Whatever the reason, though, giving up on budgeting will almost certainly be detrimental to a person’s finances and may mean that they miss out on many of the longer term objectives that they wish to achieve. Let’s look then at how people can ensure that their budgeting commitment benefits from “stickability”.

Highlight why you are introducing a budget:

People don’t just choose to budget for the sake of it. Adopting a budget is a recognition that we need to control our spending, so that we live within our means and maximize the amount of disposable income that can be freed up to put into savings and/or investment products. However, it’s easy to lose sight of the reasons why we decided to budget, so a really useful approach is to make a visual record of why we have committed to a budget. This can take the form of writing down key objectives and pinning them on your wall, or you may choose to pin up a picture of that dream house that you hope to be able to afford.

Having such physical representations of why you are budgeting will act as a reminder of the continued importance to operating within your budget. This reinforcement can be a really powerful tool to guard against the risk of apathy taking over!

Keep things simple:

A budget can be as simple or as complicated as you choose. However, at least to begin with, you are probably more likely to stick with a budget that is simple and easy to understand and which involves minimal day-to-day admin. Remember that you don’t need to use a complicated software package to record your budget; it can be as simple as a spreadsheet with a few columns to record your spending. Keeping your budget simple should serve to ensure that your focus remains on the really important objectives and that you don’t start to view the budgeting process as a huge inconvenience.

Monitor how you are doing against your budget:

A key component of budgeting is that it involves setting targets and then seeing how we are getting on against those targets. Having targets can act as a form of psychological motivation as we will strive to meet our chosen targets and will feel good about our successes. Getting regular reminders of the benefits that our budget is driving will also help ensure we remain committed to the cause.

Set realistic targets:

A lot of people start out really enthused at the potential of budgeting and go a bit crazy when setting up their targets. However, if you set unrealistic targets and then fail to achieve them, this will tend to cause a sense of dejection. We may become overly harsh on ourselves and allow negative thoughts, such as “I can’t do this” to enter our heads. Particularly to begin with, it’s therefore important that you set targets that are realistic to achieve. You can always adapt them further down the line if you find that they are too easy to achieve. In the business world, we learn about the importance of setting SMART objectives, where SMART stands for Specific, Measurable, Achievable, Realistic, and Time-bound, and the same principle applies to personal budget objectives.

Seek buy-in from your partner:

Where someone is part of a couple or family, it can be difficult to stick to a strict budgeting regime if other household members haven’t also bought into the budgeting objectives. Managing money successfully is not just the job of one person; rather it is something that all members of a household need to commit to. They then can also help to motivate you to continue if you go through a temporary low energy hiatus.

Avoid temptations:

The good intentions of some people are overridden by the temptation to spend if money or credit facilities happen to be available. This will then cause people to fail to achieve their budget targets which may, in turn, lead to a disillusionment with the budgeting process. There are a couple of things that can be done to reduce this risk. Firstly, you can transfer money from your checking account to your savings account on pay day. This means that the money will be out of sight when you check your checking account balance and hopefully you won’t dip into your savings account. Additionally, it may be beneficial to reduce the number of credit cards that you hold, or request a reduction in your overdraft limit, so that you aren’t tempted to use these credit facilities as simply an extension of your monthly income.

Work to make saving a habit:

When we first start budgeting, we often have to forcibly remind ourselves that we are supposed to be cutting costs and putting money into savings account. However, the longer you persevere with budgeting, the more it will become a subconscious habit. In effect, you have changed your attitude to spending and from this point on budgeting should feel a lot more natural and less of a burdensome activity.

Budgeting must come close to “New Year resolutions” and “Getting fit” as the promise we make that we most commonly fail to adhere to. However, the risk of falling by the wayside will be greatly reduced if you follow the points that we’ve covered off in this article. It’s worth remembering that there is generally no quick fix to our finances but the long-term benefits of budgeting will nearly always be worth the little bit of ongoing effort that you will need to put in. For example, every dollar that you save will take you that step closer to being able to retire, or being able to afford your own house, or whatever other life dreams you are pursuing!