Step 1: Your Compelling Reasons Why
If you were to ask 2 people why they want to start budgeting, and their answers were as follows:
Person 1: I want to save more money.
Person 2: I’m tired of living paycheck to paycheck, and I know that if I don’t stick to a budget and make better financial decisions, the only inheritance I’ll leave for my family is a mountain of debt. And that makes me sick. Also, my wife and I share a dream of paying cash for our first house, and good budgeting habits will allow us to do that in less than 5 years.
Which one would you most expect to succeed?
Did you pick Person 2? Why? I’m willing to bet it was because his reason for budgeting was clear, personal, compelling, and passionate; all the things that inspire confidence and lead to success.
In my own life, I can attribute every noteworthy accomplishment in my life to a “Person-2-Style,” compelling reason why I wanted to succeed. In contrast, I can trace every failure back to a “Person-1-Style,” half-baked reason why.
If you are serious about budgeting, you need to search your soul for a powerful reason to succeed. This reason needs to be unique to your life, and it needs to be emotional.
For example, if getting out of debt and quitting your job is your reason to start budgeting, don’t just say, “I want to get out of debt so I can quit my job.” Instead, say “Im sick of my monthly payments trapping me in a job that I hate. I am going to pay off all my debt in the next 6 months, and change my spending behavior. That way, I will have the financial safety to quit my job and pursue a career I will actually enjoy!”
Now we’re talking.
Side note: Don’t feel like you have to have 1 perfect reason. You might have multiple compelling reasons to stick to your budget. And that’s a good thing!
Step 2: Confronting Obstacles That Cause Failure
If you were to fail at budgeting, what would be the cause? Unexpected expenses? A lost job? Your favorite department store?
I want you to spend the next few minutes writing down any obstacle that might derail your budget. Don’t pull any punches. If it has the potential to throw you off your budget, write it down. No exceptions.
Now let’s pair each obstacle with a plan to overcome it. Here are a few examples:
For instance, if you are known to overspend on groceries each month, you can plan to only bring your budgeted amount of money for groceries, in cash, to the store every time you go, while also leaving any other form of payment at home. Budgeting failure averted.
Obstacle: I almost always overspend on groceries each month.
Plan: I will only bring cash with me to the grocery store each week, and it will always be within my budgeted amount.
Obstacle: I am forgetful, so remembering to enter expensed into the budget on a daily basis might derail me.
Plan: I will set a daily reminder on my phone that will alert me every evening when I get home from work to spend 5 minutes working on my budget.
Obstacle: I am not very interested in budgeting, even though I know I need to, and I am concerned that will be my budgeting downfall.
Plan: I will place sticky notes with my “compelling reason why” in obvious places that I can’t miss. That way, I will be forced to remember the true reason for my budget.
The sticky notes method works really well for me!
You will have to confront your budgeting obstacles at some point. Might as well dominate them before they ever appear. But that’s just my opinion.
Step 3: Define Success, and Celebrate It
Budgeting is tough, because there isn’t a universal end goal. It’s a process. It’s a habit. There isn’t a “Budgeting World Championship,” you can win. There isn’t a dollar amount that you can achieve, where budgeting will suddenly become irrelevant. You need to define your unique version of success in budgeting.
This is why I like “Stepping Stone Goals.” Stepping Stone Goals are small goals that can be achieved and celebrated along the path of achieving much bigger goals.
An example of a stepping stone goal might be:
- Spend 5 minutes working on my budget every day this week and find a way to save $20 more than I did last week.
- Squeeze an extra $60 of spending money out of the budget this month to take Katie (my wife) on a surprise dinner date.
- Pay off $200 more in debt than I paid last month. Celebrate by splitting a bottle of wine with Katie!
- For every $5,000 I save, I will give myself a $200 gift card to my store of choice so that I can buy something fun!
The key thing to notice is that all the goals benefit the long term purpose of the budget, while also involving some form of celebration. You need to experience success and celebration along your budgeting journey. If you don’t, budgeting will become tiresome, rewardless and boring. That doesn’t end well.
So, if you ever feel like your budget getting a little dry, set up some stepping stone goals and reward yourself for achieving them. Your budget will thank you!
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