Some people refer to budgets as a “money diet.” That’s an unfortunate choice of words given the negative connotations associated with dieting: reduced options, deprivation, maybe even pain.
That’s not to say that diets aren’t important. And just as with budgeting, you feel optimistic: I will eat better, exercise more, lose weight and be able to wear all those “skinny clothes” hanging in my closet! The first couple of days feel great. You wonder why it took you so long to wise up.
After a week or so, reality may set in: How long will I have to live this way? Why are so many of the world’s tastiest foods off my list? Can I ever stop counting calories? Why do all those food trucks have to park so close to where I work?
You muddle grumpily along until someone brings cupcakes to work or friends cajole you into meeting them for dinner. Then in one sitting you inhale the equivalent of all the calories you avoided in the past seven days.
The good news: A budget doesn’t have to hurt. It’s not punishment for sins, real or imagined. It’s a simple, smart tool for taking control of your finances.
Like a healthy and realistic diet, budgeting is all about balance: saving money (or calories) where you can so you can spend (or eat) where you want.
You wouldn’t switch overnight to a 1,000-calorie-a-day diet plan. Don’t do that with your finances, either. Remember, a budget is just a spending plan. It’s a tool for directing your money to where it will do you the most good.
That’s why the first step is …
1. Create a Goal
What do you really want out of life in the short and long terms? Maybe your budget is currently about damage control, e.g., consumer or student debt or paying off that lemon you wish you’d never bought. Or you could be thinking about the future: entrepreneurship, a home of your own, a self-funded retirement.
Knowing what you want gives you a starting point: $7,000 for the last of your student loans or $1,500 to kill that credit card balance once and for all. Facing the debt means you’re taking charge versus continuing to feel helpless in the face of growing obligations.
That first step demands a very specific second one.
2. Schedule That Goal
Financial writer Napoleon Hill wrote that “a goal is a dream with a deadline.” Without a deadline, that goal may remain on permanent “someday” status.
If your aim is retirement, prioritize it: Compound interest is your friend. For other goals, one of the best ways to get started is to set it and forget it, i.e., to automate a monthly amount toward savings or debt. Open a subaccount, name it for your goal (“Pay Cash for Next Car,” “Down Payment on Home”) and send whatever you can reasonably afford each month.
Don’t make the mistake of thinking, “All I can afford is $10. What’s the use?” Automate it. By the end of the year you’ll be $120 closer to your goal.
So you’ve clarified your vision and maybe even named it. How much can you afford to put toward it each month? You’ll find out by taking the next step.
3. Track Your Spending
If you don’t know where your money is going now, how can you make it work the way you want?
Some people keep it all in their heads, or so they say. But if you’re not writing things down, it’s so easy to forget a couple of bucks here and there – and that adds up. For example, you know you spent $30 on gasoline but conveniently forget the energy drink and beef jerky you bought when you went inside to pay.
You don’t have to carry a little notebook around unless you want to do so. All sorts of budgeting spreadsheets exist online, such as Mint and moneyStrands. Or use a budgeting app or online budgeting software such as Money Talks News partner PowerWallet, which will track your cash, measure your progress and maybe even give you coupons plus tips on things like the best savings account or the most favorable loan rates.
Remember: You’re not doing this to punish yourself, but rather to get smarter about your funds. Yet sending as much money as you can toward debt repayment or goal-funding might start to feel like deprivation. That’s why it’s essential that you …
4. Start Slowly
Deny yourself too much, and you may crack after a few weeks. Next thing you know you’re going on a wild online shopping spree or buying rounds for your buddies at the sports bar. And no, it doesn’t matter that you used online coupon codes or that it was $3 pitcher night. You still blew the budget.
If that happens, get yourself back on the frugal wagon, but with modifications. Allow yourself a bit of a slush fund for small niceties or a touch of riotous living, always with an eye toward reducing the costs (see “$3 pitcher night,” above). Use cash only, and stop spending once you’ve used up your fun fund for the month.
Remember, plenty of frugal hacks exist to help you enjoy life inexpensively (or even free).
(Oh, and see if you can send back that stuff you ordered. Many online retailers have generous return policies.)
A great way to stay focused is to find a budget buddy, someone who also wants to spend smarter. The two of you can hold each other accountable, money-wise.
But maybe you can’t find a budget buddy among your current circle of friends, or maybe you’re embarrassed about talking money with your pals. If so, …
5. Find a Budget Coach
Organizations such as the National Foundation for Credit Counseling and the Association of Independent Consumer Credit Counseling Agencies offer money help on a sliding-scale basis, and those who belong to those groups never refuse help to those who cannot pay. (Tip: Be sure to check any credit counseling organization through the Better Business Bureau and your state attorney general’s office.)
A budget coach may have financial hacks you’d never considered. This person can also help keep you motivated, especially when it comes to the progress you make.
6. Monitor Your Goals Regularly
Compare your budget with your actual day-to-day spending. Sometimes a wild card like car repairs or medical co-pays sends you way over budget. But if you find yourself in the red more than once in a while, it’s time to look for ways to stay motivated.
Maybe a “just this once” coffee, lunch out, toy for your kid or pizza for the family has burgeoned into an inability to say no. Here’s a phrase that can help: “That’s not in the budget right now.” Practice saying it to friends, family and most of all yourself. It’s so tempting to think along the lines of “it’s been a rough week so I deserve that movie/book/doodad.”
7. Be Flexible
Suppose gasoline prices spike again or you need $20 for your middle-schooler’s chess club fee. The money has to come from somewhere, so you need to be able to shift dollars from category to category.
Note: This is not a license to overspend. Quite the opposite: It is a sign that you need to get creative about meeting your needs. If you want your kid in chess club, it could mean sacrificing a couple of treats, e.g., skipping that once-a-week lunch out two times this month.
More deprivation? Look at it as enrichment for your child and pack a couple of extra lunches. Keeping things in perspective is a major component of that thing called adulthood.
Here’s another way to look at any minor (or even major) deprivations: I’m doing this for a reason. A good reason. In other words, remember to …
8. Celebrate Your Progress
In the past 90 days you pared that consumer debt by $330 – way to go! Your emergency fund is up to $800 – woot! You started that Roth IRA and automated a small monthly contribution – yay you!
Seriously: Compare the way you’re living now, taking charge of debt, making plans for the future, to the way you used to live. Remember the feeling of hopelessness, the fear that you would never get ahead? Now you’re doing something about it.
Change is growth, but change is also hard. Eventually a budget will be easier to follow. Yet even if it becomes second nature, it may never be what you’d consider fun. You may miss those shopping sprees or impromptu vacations.
But here’s what you won’t miss: that panicky feeling when you open your credit card bills, or the “not again!” rue of seeing several NSF fees on your bank statements.
Or maybe you’ll find living on a budget to be very satisfying. Knowing where your money goes might turn into a feeling of security and empowerment. When things go wrong, and you know they will, you’ll be able to cope without panic or incurring debt.
Better still: You’ll now have long-range goals to keep you focused. Knowing that someday you’ll be able to pay for that car outright, or that you’ll be able to help put your kid through college, is the definition of a dream with a deadline.
This post originally appeared on Money Talks News.
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Image: JOHN GOMEZ