Are You Having Trouble Sticking to Your Budget?

October 18, 2016

I love what I do for a living, but there are definitely some drawbacks. My friends and family will come to me with financial questions but will run from me like I have the plague if they are not following my advice. In fact, a family’s or friend’s communication with me after I give advice is my best indication if they are actually following my guidance. I find the more voice mails I leave, the more likely they are not following my guidance. Such was the case with one of my young cousins.

Samantha is a recent college graduate in her early twenties that recently landed her first job. Immediately, the “I wanna have” disease took over and she quickly found herself barely able to make it from paycheck to paycheck. We sat down and worked on a spending plan based on her lifestyle. As a Starbucks fanatic, I am the last person to deny someone a pumpkin spice latte, but I encourage people to create a budget so you are not “latteing” yourself out of paying off debt, building an emergency fund or saving for retirement. She took my advice…or so I thought.

After not hearing from her for months, which is unusual, I finally got her on the phone and she admitted that she had been avoiding me because she was not following the budget. Once I told her that it was okay, that a failed budget only means re-strategizing, we looked at ways to help her stick to her spending plan. If you are having trouble sticking to a budget, consider doing the following:

1. Consider increasing some of the areas where you continuously overspend. Samantha struggled with eating out. She is young, single and in a new city. Her income allowed for some eating out so she decided to eat out 5 days a week, bring her lunch into work and eat at home twice a week.

She reduced her grocery budget and increased her eating out budget. Since part of the reason for her eating out was loneliness, I suggested having a potluck or pizza/home movie night with friends on one of the days when she eats at home to share the cost and for her to have company. Consider increasing your budget in areas where you constantly overspend. Remember, you have to make up for the overspending by decreasing spending in another area though.

2. Consider using cash for areas where you overspend. If you have areas where the problem is simply a lack of discipline as opposed to a need to increase spending, consider using cash. Some of the popular areas where people overspend are: groceries, clothing (this includes kids), eating out, entertainment, and gifts. If you overspend in any of these areas, consider using cash.

3. Find the method of tracking spending that works best for you. Samantha was tracking her spending with a great budgeting tool that she thought was too much work. She switched to her online banking budgeting tools, which streamlined the budgeting process for her. Her bank offered a robust app so she can stay connected to her budget online.

Consider how you want to access your info. If it is through your smartphone, consider online apps. If you want to not only budget but review investments and tackle debt, review online tools that can help you. If you are not sure where to start, consider doing what Samantha did and start with your bank’s online programs.

Remember to be patient when you start a new budget. There is almost always a need to make adjustments during the first three months. Hang in there and you will be a budgeting guru in no time!

3 Reasons We Spend Beyond Our Means

June 29, 2016

While the US personal savings rate is higher these days at 5.4% than it was a year ago, Financial Finesse’s research shows that 34% of people are living beyond their means or spending more than they make. Some of this overspending is due to factors beyond their control like medical expenses or other emergencies. But in many cases, it’s more from a lack of planning ahead combined with rationalizing what one can “afford,” a measurement that is often more emotional than based in reality.

For example, when it comes to meeting up with friends after work for happy hour, I’ll go to great trouble to avoid paying $15 for parking or a taxi cab, but don’t think twice about ordering a glass of wine that costs the same. When I stop to question this logic, it sounds nuts. How can I mindlessly afford $15 for a glass of wine but schlep for several blocks from the bus to avoid spending the same amount for more convenient transportation? We make the same kinds of bargains with ourselves all the time. If you’re looking to save more money by cutting back on spending, it’s important to be aware of these three reasons that often cause us to compromise our savings goals:

1. It feels good. Emotional buying is a lot like emotional eating. When we’ve had a bad day or are tired, sad or sometimes even ecstatic, our emotional mind tends to rule out our rational thoughts. But while a purchase may temporarily lift your spirits, it won’t solve the emotional need you’re seeking to fill.

One way to overcome this trap is to build a “bad day” spending amount into your monthly budget. I have a friend who keeps a fifty dollar bill in a hidden fold of his wallet for those days. Another way is give yourself visual reminders. I keep a sign in my office that reminds me, “Until you make peace with you are, you’ll never be content with what you have.” Rather than trying to buy your way to happiness, think about what’s really missing and take the baby steps to get closer to that.

2. The Pinterest effect. Social media has taken celebrations like weddings and even simple backyard barbecues to a whole new level of creativity and even competition to have the prettiest, the hippest, and the most impressive decorations and ideas. I cannot believe the themes some of my friends pull off for their kids’ birthday parties. To me, it’s a modern day version of keeping up with the Joneses times ten.

If your 5-year old’s classmate has a farm-themed party complete with pony rides, there’s an element of peer pressure to match or better that with your own kid’s party. That’s fine if it’s part of your budget, but if it stresses you out to think of what you’ll have to pay for a bouncy house or to have a live Elsa show up to the party, take a step back and assess your priorities. Your child won’t miss what’s NOT there, and you can use the money you save toward their education. “I wouldn’t mind taking out student loans if it means my parents had thrown me extravagant birthday parties as a kid,” said no college student ever.

3. We all love a good “deal.” It’s a proven fact that when large retailers go out of business, they often hire liquidation firms who come in and actually mark up prices so that they can “discount” them in an effort to clear items out of the store. They’re banking on buyers’ perception of getting a deal and it works. Same goes when you’re shopping online and buy more simply to qualify for free shipping.

When you find yourself buying something that you weren’t actually seeking out, take a pause and first consider whether it’s something you need and can afford. Try to fast-forward in your mind to the next time you’re cleaning out your closet or packing up to move and whether you’ll be glad you have that thing or wish you hadn’t purchased it. If you do decide it’s something you need, then do a quick check on your smartphone to make sure the price is actually a deal. Stores call this “showrooming,” which means they hate it when people do this, so try to be inconspicuous, but if you do find a lower price online, see if the retailer will honor it.

Finally, when you do find yourself overcoming the urge to spend, don’t let that money find itself being wasted somewhere else. Consider turning that victory into actual savings by transferring the amount you were considering spending into your savings. It adds up and you’ll never regret saving more.

 

The Non-Planner Perspective

May 15, 2015

I began paying rent when I was about 21 years old while living with a roommate. I was making pretty good money for my age and a couple of years later, decided it was time for my own space. Of course, with that, came more financial responsibility. Continue reading “The Non-Planner Perspective”