I tried to start budgeting three times and failed. Three times! Luckily, I am very stubborn, and if I fail in something, I persist if not to the mastery, to at least of the “feel confident” point. So now I budget, and it is part of my everyday life.
I must confess it is extremely rewarding. It brings a sense of ownership and control over my money. It also dramatically lowers anxiety associated with “what if […], and I don’t have enough money”. It also helps you to live beyond your means, save money… The rewards are countless.
But… Before I came to the point where I am now, I struggled. And now participating in the budgeting communities, I still see people are intimidated by budgeting. It feels so overwhelming in the beginning! In this post, I try to express tips that I would have given to me in the past, during my initial 3 unsuccessful attempts.
Understand the concept
Very many courses are jumping into details overloading with rules without prior explaining what budgeting is. I wrote the post Budgeting in plain English when I tried to explain the principle to my 12 years old daughter.
Track before budgeting
People often try to set a budget from day one, which leads to inevitable mistakes, constant correcting the budget, and finally overburden and decision “I’ll never be good at budgeting” (I have been there). But expecting to budget at once is the same as trying to speak a foreign language on the first day you start learning it: don’t even think it will happen.
Instead, try to follow the logical process:
- Track your expenses. You need at least a month, but I took 3 months for myself: this way I caught all “forgotten” subscriptions and get enough data for the statistical approach (meaningful “average” versus 1 data point which can appear by chance).
- Categorize the expenses into a structure meant for you (for example, see my post on Tracking Expenses) and set up your baselines for all the categories. For the baseline setting, you also can look around: how your spending for a category differs from the spending of people from your community/social cycle. There are plenty of online FB communities where you can ask questions and compare. Just do not go for extremes: we are looking for average.
- After that, start the budget. You already have your categories, your averages in the categories, so simply put the averages as your plan.
Live the future
Budgeting is a process focusing on the future while expense tracking is its spouse looking at the past. They both always go hand in hand. The trick to stick to budgeting is to understand it is two processing in one, so you need to follow simple everyday rules:
- Before spending any money consult your budget if there is enough money in the category. If it is not enough, move money from another category before you spend them. It is still not enough, you cannot afford it. (Debt is allowed only for “life or death” situations. Literally)
- Track and record your expense as soon as they are appearing. The sooner you got the habit, the easier it will be to stick with the budgeting. So it is worth applying little effort.
Time factor
I am terribly busy with my work, family, friends, and overall, with my life. So, I would never stick to something which brings more hustle in my life. My advice is to take some time to look around, which tools would be easier for you.
I used spreadsheets first (very much time for chasing spending), Mint (genuinely nice to track expenses, but very poor for budgeting for the future), and finally chosen YNAB and stick to it. I am pretty sure it’s not the only tool available there, and I encourage you to find your own.
And of course, there is a learning curve with any tool you would choose. So, get mentally ready for it. The important thing, that time you spend on budgeting should decrease with the time. If this doesn’t happen, you might analyze what you spend the most time for and search for a tool that makes it automatically. My normal time spending: 15 min weekly for card payment and reconciliation and less than 1 minute daily for entering expenses.
Make a deal with your brain
Money is a very emotionally charged topic. As with other strong emotions, sometimes our brain shutters down activities associated with the emotions. Ignoring is not healthy: anxiety grows, stress arises, subconscious mind reminds us about money issues. And as with other emotions, the only healing practice is to live it though: face the subject and walk into it.
In these circumstances, I usually make a deal with myself. I will seat and deal with the budget for at least 15 minutes. I do not have any other goal or obligations: to understand something, to learn something, to spend hours, or to accomplish something. If I do not like my feelings, I will stop in 15 minutes. C’mon, it is only 15 minutes, and even if it is not pleasant, I will not die… But I am allowed to stay longer if I enjoy the process.
And then the magic happens. First, I realize that it is not such intimidating as it seemed. Second, the cumulative effect starts building amazingly fast: you can see your progress for 3 days, a week… you are almost professional in a month. Third, the brain relaxes and removes the emotional barrier: each time it is easier and easier… And if you continue long enough (as scientists say, 66 days), you will l get your new habit: your brain will fly on autopilot and you will be surprised why it was so intimidating before.
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Each my unsuccessful attempt to budget set be back for a couple of years. It is so pity, as I sabotaged myself in saving, building wealth, and moved my retirement age at least a decade later. But the fact that I finally overcome my fear and started to reliably budget (… and save, invest and give to the community) shows that everybody can do it. Hope my tips are helpful.
Katty's Wallet 