Are you having trouble sticking to a family budget? You aren’t alone.
Budgeting is difficult. Creating one is hard enough, but actually sticking to it is a whole other issue. Things come up. Desires and cravings happen. And the next thing you know, budgets break.
So how can you stick to a family budget? Here are 13 tips to make it easier.
1. Choose a major category each month to attack
As the saying goes, “Rome wasn’t built in a day.” With that in mind, one approach to help you get into the habit of sticking to a budget is simply starting slow.
Spend too much on Starbucks runs, eat out too often, and have an out-of-this-world grocery bill? Choose one bad habit and attack.
By choosing one behavior to focus on, you’ll prevent yourself from being overwhelmed. You’ll also experience small victories, which help you gain positive momentum. This momentum can then carry over into your overall budget.
2. Only make major purchases in the morning
If you’re making large purchases in the evening, there’s a good chance you’re doing so after a long day and you’re probably tired.
Why does this matter? Because our judgement tends to be off when tired – our willpower is compromised.
Instead, only make major purchasing decisions in the morning when you’re energized and refreshed. Your brain will be firing on all cylinders and your resolve will be high. You’re less likely to give in and settle at this point.
3. Don’t go to the grocery store hungry
Have trouble with impulse buys at the grocery store? If so, there’s a good chance you’re going grocery shopping while hungry.
The problem here is that when you’re hungry, everything looks good. So you’re more likely to make split decisions on things that aren’t on your grocery list.
Instead, make sure you eat prior to your grocery store trip. Then take your list, along with your full stomach, and go shopping. Notice how food doesn’t look quite so good when you’re not fighting cravings.
4. Read one-star reviews for products
Is there a product you just have to have (but maybe not really)? Check out the one-star reviews.
By reading all the horrible reviews, you may be able to basically trick yourself into deciding that the product isn’t worth your time and money.
Next thing you know, you didn’t make the purchase, you saved the money, and you feel good about the decision.
5. Never buy anything you put in an online shopping cart until the next day
If you are making a purchase online, it’s typically a two-step process. First, you click “Add to Cart” and then you go in to review your cart and pay.
The problem is that there not typically much reviewing during step two. It’s generally click pay and there you go. However, this is the perfect point to stop for reflection.
Once you add to your cart, your best bet is to step away until the next day. Let the item sit there and grow cold, so to speak.
This gives you a night to “sleep on it” and decide if you really want and need to spend that money. If you wake up the next day and still find the purchase viable, then perhaps it’s time to go for it.
6. Don’t save your credit card info on any site you shop on
One of the other pitfalls of shopping online is that fact that most sites ask you to save your credit card information.
While the sites will frame it as a method of convenience, the truth is they know you’ll spend more money in the long run if your credit card information is saved.
The “convenience” takes away one last decision-making point in the purchasing process. True, it’s a pain to get out your credit card and enter the information every time. But guess what? That’s the point. If that inconvenience helps you stay on budget, then it’s worth it. Which leads into the next tip.
7. Tape an “impulse buy” reminder to your credit card
Credit cards make spending much easier than cash. When you spend cash, you can literally see your wallet emptying. A credit card comes out, then goes back in. No harm, no foul.
That’s why it’s a good idea to tape a reminder to your credit card. Customize a message that is something along the lines of “do you really need this?” or “does it fit the budget?”
That way when you pull out the card, you get one last reminder to help you question your decision and stick to your budget.
8. Only use gift cards to shop on Amazon
Amazon is probably the easiest place online to blow money. It’s just so easy to click and buy. However, one way you can slow the process down is buy only using gift cards. Here’s how it works.
If you plan on making a purchase on Amazon, go to the grocery store and purchase a pre-loaded Amazon gift card of the proper amount. There’s no convenience fee, so you literally pay for the money you’ll spend.
Now take that gift card home and load it to your Amazon account. There’s your money to spend.
Why does this help? It makes you have to purposely go to the score and purchase the card in order to purchase the item. That’s a pretty deliberate thing that takes some time, commitment, and thought.
This process will effectively kill the impulse buy.
9. Budget using cash and envelopes
As mentioned earlier, it’s a lot harder to spend cash than swipe a credit card. You can take this even farther by using only cash, and separating that cash by budget category.
Create an envelope for each category and stick the cash in there at the beginning of each month. When the envelope is empty, no more spending on that category, unless you borrow from another (be careful of that approach).
This can be pretty helpful for people that have a hard time following transactions in their checking account, or keeping a budgeting spreadsheet.
The envelopes simplify the tracking process, leaving no room for error. Nothing hides from you because it’s tangible in the envelopes in front of you.
10. Join a like-minded group
Making the decision to stick to something like budgeting is difficult. It takes long-term commitment.
You’re going to feel weak sometimes. And sometimes you may fail. That said, support from others can help strengthen resolve.
Support can come from a spouse or a friend, but they won’t always have the exact same goal in mind. That’s why it’s a good idea to join a support group that’s likeminded.
No need to pay here, as there are tons of free communities that fit the bill online.
For example, reddit has multiple subreddits that deal with budgeting and frugal living. You can follow, subscribe, and get active in those communities.
This will open your eyes to new tips and strategies, keep your goal fresh on your mind, and help you realize there are others dealing with the same struggles and being successful.
11. Reward Yourself
When you set a budget, it’s usually with a large goal in mind. Maybe you want to be debt free, or perhaps you want to see $10,000 in your savings account.
Whatever the case, the end goal is great, but the end is often far away, making it hard to see the end of the tunnel.
With that in mind, it’s a good idea to set mini-goals along the way. This helps you still look at the big picture but have something that’s attainable in the short-term to help with momentum.
But don’t stop there – set rewards for yourself when you reach that small goal. Maybe it’s an extra meal out. Or a new pair of shoes.
Whatever the case, this gives you something in the near future to look forward to, which can help with the fatigue that can result in pursuing long-term goals.
12. Take the Buddhist approach
You don’t have to be a Buddhist to recognize some of the wisdom in the teachings. One of the tenets of the philosophy involves accepting that we can’t have everything we want. And that’s okay.
Sometimes you won’t feel good. Sometimes you’ll have cravings. You can’t deny them. But you can recognize them, accept them, and let them pass by. Then you move on.
Apply this to the times you want to do things that will break your budget. You’re going to have the desire to eat out when you shouldn’t. You might want to stay out and spend too much at happy hour with your work friends.
The feelings will come. Recognize them, accept them, but let them go.
13. Set up automatic drafts to savings
If you wait until you’ve spent all your budgeted money to deposit money into savings, guess what? You probably aren’t going to put any money into savings.
It’s too easy to see that as extra money and end up using it to treat yourself.
Instead, set up automatic savings withdrawals. That way, the money is marked and gone before you can even think about it. It becomes a non-issue. It’s no longer “extra.” It’s just savings.
Sticking to a budget can be difficult. No one is denying that.
However, if you can do a few things to set yourself up for success, and put some practices in place to curb impulse buys, then you can (and will!) be successful sticking to your family budget.
Personal finances can push anyone to the point of extreme anxiety and worry. Easier said than done, planning finances is not an egg meant for everyone’s basket. That’s why most of us are often living pay check to pay check. But did anyone tell you that it is actually not a tough task to meet your financial goals?
In this article, we will explore ways to set financial goals and actually meet them with ease.
Table of Contents
4 Steps to Setting Financial Goals
Though setting financial goals might seem to be a daunting task, if one has the will and clarity of thought, it is rather easy. Try using these steps to get you started.
1. Be Clear About the Objectives
Any goal without a clear objective is nothing more than a pipe dream, and this couldn’t be more true for financial matters.
It is often said that savings is nothing but deferred consumption. Therefore, if you are saving today, then you should be crystal clear about what it’s for. It could be anything, including your child’s education, retirement, marriage, that dream vacation, fancy car, etc.
Once the objective is clear, put a monetary value to that objective and the time frame. The important point at this step of goal setting is to list all the objectives that you foresee in the future and put a value to each.
2. Keep Goals Realistic
It’s good to be an optimistic person but being a Pollyanna is not desirable. Similarly, while it might be a good thing to keep your financial goals a bit aggressive, going beyond what you can realistically achieve will definitely hurt your chances of making meaningful progress.
It’s important that you keep your goals realistic, as it will help you stay the course and keep you motivated throughout the journey.
3. Account for Inflation
Ronald Reagan once said: “Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hitman.” This quote sums up what inflation could do your financial goals.
Therefore, account for inflation whenever you are putting a monetary value to a financial objective that is far into the future.
For example, if one of your financial goal is your son’s college education, which is 15 years from now, then inflation would increase the monetary burden by more than 50% if inflation is a mere 3%. Always account for this to avoid falling short of your goals.
4. Short Term Vs Long Term
As a rule of thumb, any financial goal that is due in next 3 years should be termed as a short-term goal. Any longer duration goals are to be classified as long-term goals. This bifurcation of goals into short-term vs long-term will help in choosing the right investment instrument to achieve them.
By now, you should be ready with your list of financial goals. Now, it’s time to go all out and achieve them.
How to Achieve Your Financial Goals
Whenever we talk about chasing any financial goal, it is usually a two-step process:
- Ensuring healthy savings
- Making smart investments
You will need to save enough and invest those savings wisely so that they grow over a period of time to help you achieve goals.
Ensuring Healthy Savings
Self-realization is the best form of realization, and unless you decide what your current financial position is, you aren’t heading anywhere.
This is the focal point from where you start your journey of achieving financial goals.
1. Track Expenses
The first and the foremost thing to be done is to track your spending. Use any of the expense tracking mobile apps to record your expenses. Once you start doing it diligently, you will be surprised by how small expenses add up to a sizable amount.
Also categorize those expenses into different buckets so that you know which bucket is eating most of your pay check. This record keeping will pave the way for cutting down on un-wanted expenses and pumping up your savings rate.
If you’re not sure where to start when tracking expenses, this article may be able to help.
2. Pay Yourself First
Generally, savings come after all the expenses have been taken care of. This is a classic mistake when setting financial goals. We pay ourselves last!
Ideally, this should be planned upside down. We should be paying ourselves first and then to the world, i.e. we should be taking out the planned saving amount first and manage all the expenses from the rest.
The best way to actually implement this is to put the savings on automatic mode, i.e. money flowing automatically into different financial instruments (mutual funds, retirement accounts, etc) every month.
Taking the automatic route will help release some control and compel us to manage what’s left, increasing the savings rate.
3. Make a Plan and Vow to Stick With It
Learning to create a budget is the best way to get around the uncertainty that financial plans always pose. Decide in advance how spending has to be organized
Nowadays, several money management apps can help you do this automatically.
At first, you may not be able to stick to your plans completely, but don’t let that become a reason why you stop budgeting entirely.
Make use of technology solutions you like. Explore options and alternatives that let you make use of the available wallet options, and choose the one that suits you the most. In time, you will get accustomed to making use of these solutions.
You will find that they make it simpler for you to follow your plan, which would have been difficult otherwise.
4. Make Savings a Habit and Not a Goal
In the book Nudge, authors Richard Thaler and Cass Sunstein advocate that, in order to achieve any goal, it should be broken down into habits since habits are more intuitive for people to adapt to.
Make savings a habit rather than a goal. While it might seem to be counterintuitive to many, there are some deft ways of doing it. For example:
- Always eat out (if at all) during weekdays rather than weekends. Weekends are more expensive.
- If you are a travel buff, try to travel during off-season. You’ll spend significantly less.
- If you go shopping, always look out for coupons and see where can you get the best deal.
The key point is to imbibe the action that results in savings rather than on the savings itself, which is the outcome. Focusing on the outcome will bring out the feeling of sacrifice, which will be harder to sustain over a period of time.
5. Talk About It
Sticking to the saving schedule (to achieve financial goals) is not an easy journey. There will be many distractions from those who are not aligned with your mission.
Therefore, in order to stay the course, surround yourself with people who are also on the same bandwagon. Daily discussions with them will keep you motivated to move forward.
6. Maintain a Journal
For some people, writing helps a great deal in making sure that they achieve what they plan.
If you are one of them, maintain a proper journal, where you write down your goals and also jot down the extent to which you managed to meet them. This will help you in reviewing how far you have come and which goals you have met.
When you have a written commitment on paper, you are going to feel more energized to follow the plan and stick to it. Moreover, it is going to be a lot easier for you to track your progress.
Making Smart Investments
Savings by themselves don’t take anyone too far. However, savings, when invested wisely, can do wonders.
1. Consult a Financial Advisor
Investment doesn’t come naturally to most of us, so it’s wise to consult a financial advisor.
Talk to him/her about your financial goals and savings, and then seek advice for the best investment instruments to achieve your goals.
2. Choose Your Investment Instrument Wisely
Though your financial advisor will suggest the best investment instruments, it doesn’t hurt to know a bit about the common ones, like a savings account, Roth IRA, and others.
Just like “no one is born a criminal,” no investment instrument is bad or good. It is the application of that instrument that makes all the difference.
As a general rule, for all your short-term financial goals, choose an investment instrument that has debt nature, for example fixed deposits, debt mutual funds, etc. The reason for going for debt instruments is that chances of capital loss is less compared to equity instruments.
3. Compounding Is the Eighth Wonder
Einstein once remarked about compounding:
“Compound interest is the eighth wonder of the world. He who understands it, earns it… He who doesn’t… Pays it.”
Make friends with this wonder kid. The sooner you become friends with it, the quicker you will reach closer to your financial goals.
Start saving early so that time is on your side to help you bear the fruits of compounding.
4. Measure, Measure, Measure
All of us do good when it comes to earning more per month but fail miserably when it comes to measuring the investments and taking stock of how our investments are doing.
If we don’t measure progress at the right times, we are shooting in the dark. We won’t know if our saving rate is appropriate or not, whether the financial advisor is doing a decent job, or whether we are moving closer to our target.
Measure everything. If you can’t measure it all yourself, ask your financial advisor to do it for you. But do it!
The Bottom Line
Managing your extra money to achieve your short and long-term financial goals
and live a debt-free life is doable for anyone who is willing to put in the time and effort. Use the tips above to get you started on your path to setting financial goals.