This post is from Joseph Hogue at Peer Finance 101. Enjoy!
After publishing my own personal financial nightmare on my blog a while back, I’ve gotten feedback from readers relating my story to their own problems keeping a realistic budget. In almost all the comments, I’ve noticed four common reasons people are as bad at budgeting as they are with New Year’s resolutions.
My own story is a financial roller coaster. After graduating college, I landed my first job as a financial reporting analyst at a large reinsurance firm. I worked my tail off at another part-time job and saved every penny.
But a couple of times a year, I would get so burned out on working and saving that I would go on a spending binge that would set me back almost to zero.
I was working hard and had some financial sense, why couldn’t I keep my budget?
It was only through a friend’s help that I realized where I was going wrong and it is through feedback on the post that I realized how common some of my mistakes were. While readers have written in about more than just the ideas below, four reasons seem to keep popping up repeatedly and facing each may give you four ways to get your budget back on track.
Have Short-term Goals to Keep you Motivated
Most of our personal financial goals are long-term, years and decades into the future. That can seem like an eternity for someone in their 20s or 30s and can sap your motivation to save. Living frugal gets pretty tough if you’ve got nothing to look forward to for the next thirty years.
Even vacation plans set out a year or more may be too long-term for some. Try setting a three- or six-month goal for your spending and a reward if you reach your goal. Research shows that habits are formed after about 66 days so if you can keep your budget even for a couple of months, you’ll have built some good financial habits. It will make it a lot easier if you’ve got something to look forward to at the end of three months.
Clearly Define your Long-term Goals
We all want to retire early or have more financial freedom in the future but are those really long-term goals that are going to keep you motivated? What does retirement or financial freedom look like? Some people post little pictures of palm trees and sandy beaches but even that might not be enough.
By not clearly defining your long-term goals, you really are not giving yourself much to drive you on. That palm tree needs a name and those sandy beaches need to be something tangible.
Really think about your long-term goals and what you’re life will be like when you reach them. What places will you visit and what will you do? Read a couple of articles or travel blogs about the destination to get a real feel for the experience. Building a strong picture in your head will give your goals meaning and will help you keep your budget.
Enjoy Life a Little
Even short-term goals and defined long-term plans will not save your budget if you are completely miserable trying to keep it. This was my biggest problem early in my financial life. I was saving every penny and life revolved around work.
Ever listen to the words of Billy Joel’s song “Movin’ Out?” The song relates the stories of Anthony and Sergeant O’Leary, two men with financial dreams and breaking their backs to get there. Now I’m not saying it all, “seems such a waste of time,” as the song suggests but you’ve got to relax and have a little fun in life or you’re going to be a tired, bitter rich person in your old age.
Turn a Hobby into a Paycheck
I love what I do as a blogger and investment analyst but it wasn’t always that way. I started my financial career in accounting and could barely stand getting out of bed in the morning. It took years of working freelance and studying professional certifications to be able to make any money doing this but it was all worth it.
Even if you do not really need the extra money from a hobby-job to meet your budget, there are several reasons to look for money in the things you enjoy doing. Developing your skills over time will give you more financial freedom to pursue a full-time job in the future. Besides making a little extra cash, a side hustle you enjoy will also help keep you motivated and give some purpose to your professional life.
What are your favorite ways to put your budget back on track? How long do you usually keep a budget before it goes the way of the Dodo bird? Try out a few of the ideas above and let me know how it turns out.
Joseph Hogue, CFA runs PeerFinance101, a blog where you share your stories of personal finance challenges and success. There’s no one-size-fits-all solution to meeting your financial goals but you’ll find a lot of similarities in others’ stories and a lot of ideas that will help you get through your own challenges.