Amanda H. Christensen, AFC & KristiLyn Wilkinson, AFC
Ever feel restricted or unmotivated when it comes to budgeting? Us too! We’re sharing our favorite hacks that can help you have a healthy relationship with your budget, protect your financial future, and empower financial wellness whether you’ve got lots of money to manage or little. Buckle up for this blog post jam packed with golden nuggets of budgeting wisdom!
In our experience as financial educators, budgeting is high on the list of most people's least favorite thing to do! Are you reading this blog post because you love budgeting and cannot learn enough about it? How many of you are here because it is a huge pain point in your life and you are looking for a new budgeting secret that is going to revolutionize your life? As humans we often associate budgeting with deprivation, misery, restriction, boredom, and potentially fighting and conflict if we are working on it with a spouse or partner.
PSYCHOLOGICAL HACK #1: Define your “why”, evaluate values, and write down financial goals.
Before you start to run the numbers of your budget, you want to clearly identify your why. Your “why” and your financial goals drive how you spend and save money. I find people often feel a lot of guilt and shame around how they spend their money, and I believe most of that guilt comes from spending money that is not in alignment with what we really want. You’ve heard the saying that money can’t buy happiness, but actually, spending and saving money in a way that helps you live your values and achieve your goals can bring you a lot of joy in life. This gives your budget direction, meaning, and a purpose.
Not having an emergency fund can derail your budget, but it’s not really fun or motivating to save for an unforeseen future event (that is likely not a happy event). Once you have your why- it will make it easier to understand or stick to a goal like saving for your emergency fund
BUDGET HACK #1: Emergency savings (for large or unexpected expenses).
If a pandemic taught us anything it’s that unforeseen circumstances affect us financially at different levels depending on how we’ve prioritized stashing cash in case of an emergency.
Less than half of Americans have enough to cover a $1,000 emergency, according to a Bankrate survey, and a similar survey found those aged 18 and 24 had less than $1,000 in their savings accounts, period. Nearly half have nothing saved at all.
DO THIS TODAY: Assess the current status of your emergency savings. Start with ONE. One hundred and then one thousand and then one month’s expenses in a high yield savings account. Other hacks for prioritizing emergency savings include:
PSYCHOLOGICAL HACK #2: Discover your money script history.
We all have money history, but we probably haven’t given it much thought. Your money script history is the story you have in your head about money that is shaped by your life’s experiences with money. Did your family of origin talk about money or not? Was there a lot of money or not enough? The experiences you had with money growing up shape that way you see and handle money now. It is a very helpful exercise to write down your money story.
What were the spoken and unspoken messages you received surrounding money growing up? If you have a lot of anxiety or a difficult time talking with a spouse or partner about money, there is likely a reason for that. Cluing into your money history opens doors for you to make progress and changes going forward. It helps you understand where you (or a partner) are coming from and then change the narrative if you don’t want to move forward with it.
One budgeting obstacle that many people experience is how much to spend on holidays, birthdays, etc. If you are struggling with this you might not have visited your money history or thought through some of your questions. How does my money story/narrative impact my spending on these things today? A revolving savings account is a key budget hack to help you plan for these expenses once you have identified how much you want to spend on these items.
BUDGET HACK #2: Revolving savings (irregular but expected expenses).
If we were to brainstorm together a list of irregular but expected expenses you might say things like: Halloween costumes for my kids and trick-or-treat candy, photographer for family photos, back to school registration and school clothes and supplies, winter clothing and boots for my kids, one-time charitable donations that I plan for each year, replacement running shoes (they don’t last forever and the good ones are $$), summer camping trips and other vacations, Mother’s and Father’s Day gifts, Easter basket gifts, birthday expenses for my family members, PTA and other membership fees, my favorite yoga app subscription that I pay for annually, oil changes, new tires, other planned car expenses (plus a little room for unexpected repairs), swim lessons, soccer registration, dance tuition for my kids....and the list GOES ON!
One Utah Money Mom's follower said, “In the month of December alone, I need to pay for two car registration fees (plus their safety and emissions tests), all the many Christmas expenses I have, including hosting holiday parties, my birthday and expensive race registration fees for my husband’s hobby. That’s too many expenses for my monthly income to handle by itself. Help!”
DO THIS TODAY: Open a “Revolving Savings” savings account at your financial institution. Figure out your total, yearly amount for all these irregular, expected expenses. Add each month together into one big lump sum. Next, divide by 12 (or by however many paychecks you have in a year, whatever is easiest for you to set up how much to take from each paycheck. This is your monthly total to set aside so these expenses don’t bust your budget. DON’T SKIP setting up an automatic transfer!
Tip: use some tax return money to jump-start this special savings account.
Tip: if you do the math and see that the monthly amount is too much, rethink how much money you’re allotting to birthday, Christmas, etc. spending.
PSYCHOLOGICAL HACK #3: Discover your money personality.
Along with your financial “why” and your money script history, everyone has a money personality, or a money habitude that is shaped by your money story. Your money habitude is a combination of your habits and attitudes surrounding money. There are different money personalities quizzes you can take online. Our favorite is the money habitude quiz, and you can get access to it for free through our Power Pay Money Master course.
BUDGET HACK #3: Personal spending allowance (to give yourself permission to spend, prevent “restriction leads to rebellion”, and support financial autonomy (critical particularly for women).
When I’m asked by couples what’s the number one thing that I’d recommend they do as they move forward managing their money together, I suggest they implement a personal allowance. Every person, whether you’re in a relationship or not, will find that complete restriction with personal spending leads to rebellion. You need to give yourself permission to spend within boundaries and parameters that will help you feel fulfilled, happy, and empowered rather than guilty, angry or scared.
Further, the financial autonomy that comes from deciding to save up for a big purchase or spend your allotted amount each month is critical particularly for couples.
DO THIS TODAY: Open an additional account at your financial institution. Automate 1-2% of your take-home pay every month with the understanding that you’ve got to make sure the amount is affordable. This is money above and beyond your entertainment budget, your savings for vacation, etc. Only rule = you can’t borrow into next month. You can spend in full every month or save from month-to-month for a big-ticket item or experience.
Tip: when you use a percentage to calculate how much money you allot for personal allowance, then when you get an increase or decrease in income, you can easily change your personal allowance amount.
PSYCHOLOGICAL HACK #4: Set money boundaries.
We like to say that a budget is simply telling your money where you want it to go instead of wondering where it went. We mentioned earlier about the guilt and shame we often experience around how we spend money. This ultimately comes because we haven’t set proper money boundaries. In order to have healthy relationships we have to set boundaries. We have to put up boundaries with extended family, in-laws, even our partners, etc. in order to enjoy our relationships and not lose our minds. We can probably all think of a relationship where there weren’t appropriate boundaries, and it’s likely those relationships left us feeling anxious, angry, frustrated, mad, overwhelmed, etc.
So, what does a healthy budget look like? The good news is this is subjective and depends on your personal values and goals, but they all have a few things in common.
BUDGET HACK #4: Budget for fun money.
We strongly advocate spending money according to your values and goals. If you are one who associates budgeting with deprivation, misery, restriction, boredom, and conflict, if we are working on it with a spouse or partner, we encourage you to change that narrative by prioritizing “fun” in your budget. This may look different depending on the person/situation.
DO THIS TODAY: Set up a separate “fun money” account. Start with 1-2% (similar to the personal allowance). You don’t feel 1-2% as much as you do 10% coming out of your paycheck. Increase over time. Don’t wait to “figure it all out” about what you’ll use the money for. Set up the auto transfer so when the opportunity comes you can take advantage.
We hope this in-depth blog post has given you a new perspective on the way you think about budgeting. We hope it helps clear up some possible budgeting pain points for you so that you can have a better relationship with your money.
Amanda & Kristi
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