An article published on CNN.com made us realize just how important a budget is for those who usually do not have enough to live on each month. The article followed the efforts of Rep. Tim Ryan and his family as they lived on a minimum wage budget for a week. This means they only have to live on $7.25 per hour for 7 days. At the end of the week, they failed the challenge. But one thing made itself clear: without a budget plan, it will be impossible for anyone to make their money fit their needs.
The issue on minimum wage seems to bring light on the importance of making a budget. It is not just about making sure that you have enough money. It is about making sure that your expenses will stay within your financial resources. It is true that budgeting puts your finances in order because it brings to light how much you are earning each month and expenses that it has to fund. It also shows you whether or not it is enough to finance what you need. If not, then your budget plan becomes the tool that will help you lower your monthly expenses.
The thing about budgeting is, it is not always easy to live by it. This is especially true if you are not used to using it. But if you know that your money is not enough to last for the whole month, you have no choice but to apply it in your financial life. Otherwise, you will find yourself at a deficit at the end of each month. While that is bad enough, it is worse when the deficit makes you unable to pay for the important expenses.
Most people understand the importance of having a budget but unfortunately, some of them fail to follow it because they get discouraged by their inability to make ends meet. While it is understandable for you to feel this way, that does not diminish the fact that a budget plan is vital to make your financial situation from taking a turn for the worse.
3 mind tricks that will motivate you to stick to budgeting
But if your finances is so discouraging, how can you motivate yourself to stick to your budget? What can you do is all your efforts still end up with your spending going beyond your budget strategy?
It’s all in the mind. This is not some hocus pocus that you can do and it will involve hard work and effort. But when things are as bleak as living on a minimum wage, you know that you need to condition your mind so you will keep yourself from feeling discouraged.
There are three simple yet effective mind tricks that you can actually use to help you stick to your budget even when it seems mathematically impossible.
- Choose a budgeting method that suits your lifestyle. If your mind is already struggling with the whole idea of making and maintaining a budget plan, then make it easier for your physical body to do it. Whatever you think will remind you to always budget can be used. There are many budgeting strategies out there: the envelop system, 50/30/20 or you can even use the different apps that are available online. You can use a pen and small notebook to keep track of all your spending. Choose the method that suits your lifestyle. If you are always in front of the computer, then a budgeting software like that of Mint may be something that you can use. If you have a long commute via bus or subway, you may want to download that app on your phone so you can look at it while you are travelling. Or if you want the most simple method, the envelop system usually works well. Just put the money allotted for food in an envelop and if it runs out, you know that you no longer have any money to spend on food. This should make you more hesitant to spend a lot on dining out.
- Multiply unexpected expenses by 4. The most common reason for people to divert from their budget plan is usually because of unexpected expenses. To help keep yourself from making these unplanned purchases, multiply it by 4. This is the average return rate of any money invested in the stock market. For instance, you wish to buy a new car that is worth $25,000 and not a second hand SUV worth $10,000 and still in great working condition. This method of thinking will tell you that you are not only losing $15,000 – you are losing $60,000 because that will be the worth of your money if you invested it in stocks. You can do this for other expenses like dining out for $100 that will make you lose $400. That should dampen your enthusiasm about pushing through with the purchase.
- Visualize your future. There is nothing like having a visual of your dream life to motivate you to work hard for it. Or it can be a photo of your children – if they are your strongest motivating factor. You can print a photo of your dream house, your intended retirement money – anything that you think will push you to improve your financial situation. These can be used to help you stick to your budget plan. According to Mindtools.com, having a visual of your goal is one of the most powerful techniques to motivate yourself. Not only that, it will build your self confidence so you can survive any hurdles that will come your way. Even something as grave as living on a minimum wage will not stop you from reaching your goals.
Sticking to a budget plan may be difficult to get used to but once you have established it as a part of your finances, you can develop it to be a habit. That way, it will come naturally for you and you do not have to force yourself to rely on your budget all the time.
Important items that should be included in your monthly budget
If your budget plan is very difficult to stick to because you are always overspending, you may want to make sure that it contains all the right details. If you fail to include one in your plan, then you will really end up overspending at the end of the month.
Here are the 4 important parts of your budget plan.
- Fixed recurring expenses. The first involves all the fixed recurring expenses that you have – utilities, bills, debts, food, transportation etc – anything that is constantly being paid each month. You want to allot an amount for each of these expenses so you are sure that they will be funded.
- Long term saving goals. These include your retirement fund, college savings and even the big expenses that you want to make in the future like a home or a car. You want to include future purchases here so you do not have to borrow money to pay for them.
- Unexpected expenses. You should also include in your budget plan the unexpected expenses. That means you need to put aside money to grow your emergency fund. This is also a common cause of debt. If you have the money set aside for emergency car repairs or health-related events, then you do not need to be in debt to pull yourself out of tight spots. You may also want to include here the other non-recurring expenses like birthday gifts, holiday expenses or other annual expenses that you usually make.
- Entertainment. Lastly, you should not forget about your entertainment expenses. We all need to unwind at some point and you should think about budgeting for this. It will help in the motivation department so you do not feel too discouraged by your financial situation. Even a small amount should keep you from breaking and diverting from your budget plan because of too much stress.