Budgeting Like Dieting Won’t Work, Here’s An Alternative
Budgeting like dieting doesn’t work because people don’t integrate it into their lifestyle. This is usually a task recommended by a finance person. Is there a better alternative to achieve your budgeting goals?
Most people spend and try to save what is left, usually little or nothing. Take Warren Buffet’s advice: “Don’t save what’s left after you spend; instead, spend what’s left after you save.” The question is: How do you determine how much to keep?
Budgeting as if dieting won’t work because it’s not part of a lifestyle
Let’s look at the budget and why it doesn’t work for many people. Budgeting is a means of having sufficient resources to achieve goals in an orderly and systematic way. You need discipline, perseverance, and goals that you are passionate about. Also, it can create stress if you see it as a restrictive tool. On the other hand, in today’s consumerism with cheap money, easy credit, and flashy gadgets marketed seductively, many people don’t stick to a budget. People are not willing to give up the “deal.” Although, to capture this deal, they usually spend on credit without any financial benefit.
Most of the people I coach have a hard time budgeting. If you’re like them, frustrated with the budget, try something new in 2019. However, first decide why you should do something. Why not keep behaving as much today and spend as you wish? When I posed this question to someone I will call Richard, he responded, “I need to improve my financial situation, I cannot continue as I do now.” He explained that you need to reduce financial stress and have a sense of control over your finances.
Spend what’s left after savings
Returning to Warren Buffet’s advice, Richard decided that for 2019, he plans on a monthly basis to identify amounts to save and then spend what is left. Contrary to my opinion, he did not want to specify savings goals: an item, event or project to save. Instead, he decided to set aside $ 1000 a month.
“Is this amount realistic?” I asked.
Richard said: “Yes, I developed the figure after reviewing my spending for the last six months and highlighting patterns. I am confident that I will save this amount and juggle what is left.”
Richard decided to keep this famous Warren Buffet quote on his desk every day to motivate him to save: “Someone is sitting in the shade today because someone planted a tree a long time ago.”
“Won’t this approach to saving cause as much stress as the budget?” I asked.
“No, I know my spending pattern, the critical areas where I need to allocate funds on a monthly basis, and I want to generate savings,” Richard responded.
The save-first approach excites Richard. You know that budgeting like dieting doesn’t work because it must be part of your lifestyle and you don’t plan to incorporate that behavior into your routines. However, he is confident that he can adopt the savings approach as part of his lifestyle because he believes that savings are crucial to alleviating financial stress. That is why he plans to establish a monthly transfer of $ 1000 to a tax-free savings account. You will consider the amount available to spend as an acceptable restriction. Plus, you know that this approach will bring you comfort in handling emergencies when they arise.
“Why not add savings to a budget and work with the traditional budgeting approach?” I asked.
Richard responded, “I don’t want to allocate and monitor funds to individual categories. I just want two general headings: Savings and Spending.”
Budgeting like dieting takes commitment to change
I suggested to Richard that when he has a critical spending category in a month that he allocate an amount to that category and put it in an envelope. If you don’t want to put cash in the envelope, you could put a three-by-five or a different size card with a note of the upper spending limit and record the spending on the card for the month so you know when the balance runs out.
Richard agreed and decided to track his monthly expenses (using an app and internet banking) for one reason only: to understand his spending pattern and spending factors more fully. Also, plan to get a responsible partner to discuss the challenges and help you learn and grow from each month’s experience, especially the missteps.
Essentially, saving and then spending what’s left means continually prioritizing spending alternatives and accepting spending limits on a monthly basis. You are confident that you will succeed because you are intrinsically motivated to save and want to break the cycle of trying to budget, then failing and not saving.
How is your budgeting approach? Budgeting like dieting doesn’t work because it generally doesn’t become a lifestyle issue, but people see it as a specific and frustrating program. In reality, the problem is not the budget, but the attitude of the people about it. Do you think it is time to do something radical with your finances? Richard plans to do it and I intend to work with him. I am excited to be traveling with him and committed to being his cheerleader.
With consumer debt savings means debt repayment
Richard has no more debt than a mortgage. If you have consumer debts, I suggest you focus your “savings” on eliminating them before starting the new procedure.
What if you don’t have cash to save but have to make a living from pay-check-to-pay-check? Your only option is to work with what you have. However, I believe that this condition is necessary to work with a budget. Identify an amount, no matter how small, and start setting aside that amount not only to gain discipline as you work your way out of your current condition, but to create an emergency fund. To create this fund, pretend to earn less and save the difference.
Many people have a New Years resolution to save, better manage money, or some similar approach to tame their finances. It is essential that we understand that the problem is finances, but our attitude about it.