Create An Artificial Scarcity To Save Money
I hate to budget. Budgets seem restrictive to me. It’s totally psychological, but for some reason the mere act of making a budget makes me feel like I’m depriving myself, and nobody likes being deprived: it’s depressing. Inevitably, I would end up breaking my budget. I wouldn’t go into debt, of course, but I would end up saving significantly less than I would have liked. Budgets do not work for me.
Get Off The Treadmill
Modern Americans (most westerners, actually) are conditioned to spend. From the moment we’re born to the day we die, we are bombarded by advertisements for goods and services nobody needs but yet nobody can seem to live without. For me, budgeting doesn’t work primarily because it relies on my own will-power. While I have plenty of will-power when it comes to some things, such as training for a marathon or finishing a project, it’s not so good when it comes to depriving myself of something I want when I know I have money in the bank to pay for it. The solution? Make sure I don’t have money to pay for it.
Artificial Scarcity
I’ve been doing this as long as I can remember, but apparently there is a name for it: artificial scarcity. If you transfer money out of your checking account as soon as you’re paid, it’s not there to tempt you. For most people, money in a checking account is “current spending” money while money in a savings or investment account is psychologically different. Where most people wouldn’t think twice spending money out of a checking account, they would cringe at the thought of transferring money out of savings or selling a stock to make a purchase. My strategy is simply to transfer a fixed percentage of my income to various money market and investment accounts as soon as my paycheck hits. Having met my savings goal for the month, I simply spend whatever’s left. That way, I never have to budget or track my spending because as long as I pay my credit card off every month with what’s in my checking account, I know I’ve met my savings goal. If budgeting doesn’t work for you, and they don’t for many people, try something else.
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This is a good idea, but it’s like lying or tricking yourself. I don’t like being tricked or lied to, so why would I want to lie to myself? If it works for you great but would rather create a budget.
If a budget makes you feel depressed, then you can try other ways to budget. Here are a few ideas;
1) Try post-budgeting or creating a budget for the previous month, just to see how you did. This removes some of the pressure of creating a budget for the future that you have to live up to.
2) Try creating a budget with ranges for the amounts. That way to don’t have to hit an exact number, just somewhere within a range. For example, you could say that your food budget is between 200-300 per month or your savings in between 50-100 per month.
3) Try easing into a budget. Suddenly living on a budget after years of spending without a care can be a shock to anyone. Try setting a goal to migrate into a budget over a one year period. The first 6-month, just track your expenses and see where you are spending your money without putting any pressure on yourself to change. Then, in the next 3-months, start a list of things that you could change and the following 3-months begin to change your spending. By the end of the year, you will know how you are spending your money and will be more confident in creating a budget.
Even thought budgeting can be difficult, it is still one of the best methods for getting a hold on your finances.