Especially this year, we cannot wait until the New Year but when we establish unrealistic resolutions from losing 20 lbs to wanting to love living frugally, those are the last things we want to think about especially when Valentine’s Day, the chocolate food coma comes into play or Coachella busts our wallet.
We are upset that we betray ourselves at the start of each year but also really crave a change just don’t know how to make it last.
Don’t worry, this isn’t clickbait.
You haven’t landed on the wrong article.
We aren’t talking about how to keep your daily gym session habit or stop the late-night binge eating cravings, but in essence, budgeting is at the core of establishing those routines.
I’ll just say it.
Budgeting is stupid and boring.
That is why none of us stick with it.
If it was fun and easy, like scrolling through our feed or eating half a bag of peanuts without realizing that the calorie count is equivalent to 2 full-course meals, then we would all be saving instead of spending and appreciating what we earn instead of trying to keep up with our salary.
The more you make, the more you want to spend until you realize you are working harder to keep up with the demand you’ve created for yourself.
Before you budget, save, whatever you want to call it, you have to identify why you want to do it.
The more obvious reason is that well, you want to have more cash on the back burner saved up for either an emergency expense, short term expenses such as a vacation or saving up for a car, long term expenses such as buying a home or buying a pet, 529C plan for college, 401k, ROTH IRA, high yield savings account, to invest or simply, or to live more comfortably and securely without living paycheck to paycheck.
As you can see, this list is not exhaustive but are the most common reasons why people budget.
No one sticks to it because life is unexpected and unpredictable.
If it is wasn’t challenging, then there would be even a more massive problem with spending frivolously on things we really don’t need and no difference between what we want and need.
As with everything, education comes first.
Without financial literacy, you don’t know how to finance a home.
Without learning algebra, you cannot move on to calculus.
There are pre-requisites and rules to follow with everything.
As you can tell with your own New Years Resolutions, we certainly ride off the plan, but in essence, we pretend that it is still there.
With budgeting, there is no kidding yourself.
The more you lie to yourself, the worse off you will be.
You Are Making It Complicated
Let’s say you lied to yourself that you are making more than you are.
As a result, you would spend more than you make which is the first basic principle you should ever know about money and is immediately disregarded off the bat.
Instead, if you disregard paying attention to when you will get your next bonus, paycheck, or stop playing the lottery, you will have less to rely on and as a result, pay attention to your needs versus wants.
Now go ahead, follow the 50/30/20 rule on how you should divide your income but once you become older and wealthier, it’s harder to make this distinction, unless you want to spend 50% of your 1 million dollar salary on necessities which is unrealistic.
50% = Needs: water, food, shelter, clothing
30% = Wants/discretionary: car, watch, eating out, subscriptions to make your life more fun
20% Portion of income stashed into savings. Don’t you dare touch it
As a 19-year-old, this method has worked since I made my first paycheck earning $50 per lesson teaching tennis at age 13.
Since I did 8 lessons every week and take tax deductions into account, I was earning roughly $300 a week that I knew couldn’t be depreciating in a 0.01% APY/APR savings account only making $1 a year.
That is ridiculous.
With my advantage of being young, I knew that time was my biggest asset.
As a result, stashing it into a ROTH IRA, learning how to trade on RobinHood, and investing it into an index fund/mutual fund via Vanguard, Charles Swab were the best routes.
By this point, I’ve been a teenager now for 7 years.
As I turn 20 on Thanksgiving, I have a pretty good sense of what my age group is up to and knowledgeable on in the finance world.
Let me tell you: it’s pretty slim.
But there is absolutely no shame in that.
We can blame our parents or most importantly, the education system since our parents pay big bucks for not much in return.
As a result, I will just throw it out there…
My assumption is that most of you are older than me and even though the advice above was in relation to my time horizon, it doesn’t mean you cannot take advantage of it as well.
It is never too late to start.
The worst time is tomorrow the best time is today.
To understand the 101s of Investing and where in the world to get started, check out my articles to get a quick synopsis and no fluff on what to actually do.
Anyway, now with that brief sponsor interruption, even though it was an important message it just sounded like an ad, let’s get into it.
It is more than disappointing that only 1 out of every 3 Americans creates a formal budget every month.
That is typical since no one likes to spend their weekends on Excel but why not?
Until I took a course on Coursera and Udemy about Excel, I didn’t appreciate the power it had to help me curate a richer (value-driven) life for myself.
Even if you aren’t a grid math geek, Excel can be as simple as you make it.
Visualizations are proven to help you perform and make lasting habits since it the numbers a.k.a jargon is represented in a beautifully simple way that we prefer to read.
No one can understand and make lasting habits using numbers in a vertical column.
That would make me sick and spend more.
Don’t put yourself through that.
So I’m assuming since you are here, you want to budget better but don’t know how to.
Let me tell you a secret, learning how to budget isn’t the problem, your actions and mindset are.
You have all the tools you just cannot find them.
Frankly, the internet has not made learning personal finance any easier.
With the culmination of millions of resources to videos, we feel overwhelmed never able to get a cohesive answer that gives us what we want.
But that is also part of the problem.
We have limited attention spans and want answers now.
The best feeling is when you achieve something you couldn’t and make a lasting change you figured out yourself.
As this overrated, cheezy saying says, “If everything was easy, everyone would be rich.”
It’s cheezy becuase it’s used so often and true.
Part of budgeting is the mindset but most of it is simply taking the action.
Why use Excel or Google sheets or any other software to compile spreadsheets if you hate it?
Let it adjust to your liking and work for you.
A realistic budget isn’t writing down every dollar you spend for 30 days or planning out every meal you will have for the rest of the week.
If it keeps you sane, go for it.
For me, it would only make me crazy.
Before we understand the realistic, practical steps you can do to think rich and become wealthy, we need to demystify the rumors that have only prevented you from reaching your goals:
Myth #1: Track Your Spending
As stated above, this will make you crazy and frankly won’t help. You don’t sleepwalk when you buy a $6 Starbucks latte. You know you are doing it and want it now disregarding future consequences. Instead, use creative and sneaky solutions that I will touch on in the next section below.
Myth #2: Give Yourself Permission and Denial
Just like on a diet, if you restrict brownies, you will want them even more. Moderation is key to everything. You shouldn’t eat the whole plate of brownies, but 1 every day satisfies your sweet touch and keeps you happy without restriction. With budgeting, that is no way to live. You need to enjoy life and by doing that, you need to know what you need versus want.
Myth #3: No Credit Cards or Electronic Pay
Yes, paying with physical money keeps you more aware of your spending habits and what you are actually paying for.
If you see your empty wallet then you know you are done spending for the day until you find an ATM. With a credit card, it is unlimited but just because you use cash won’t restrict you from buying that subway ticket when you could easily walk.
Instead, take a 20-second pause and ask yourself:
-Why you want this?
-What is this for?
-Could there be an identical but less expensive option to go with?
Myth #4: Following Your Friends
It is true, the people you surround yourself with dictate your habits and who you are.
As with my friends, as much as I love them, they aren’t the smartest financial gurus to be around, especially on a night out on the town.
Pre-pandemic of course.
As a result, it is important to take a holistic view of who you are with. If you know they don’t’ have the education, don’t restrict yourself from being with them just understand they will not lead you into a better more financially free place. Be hesitant of hearing what they order and what clothes they wear becuase everything you don’t have, you want. Instead, maybe your partner or spouse makes better financial decisions so follow them. How do you find out?
Simply by observing the way they interact, spend, eat, and mention about money.
Don’t ask them what they make or have because that will only turn them off.
Use your cues to gauge if they are somewhat educated.
That will be a better example for you.
Myth #5: What They Have You Don’t Need
We are all individualized and because my 16-year-old cousin can eat 20 pizzas and a Coke and not gain weight while I eat 1 slice and be bloated as big as 30 balloons stuffed under my shirt due to my slower metabolism, doesn’t mean I cannot see or observe what he is doing.
By no means do I advise you to eat that many pizzas because it is simply dangerous for your health and won’t make you feel so hot or your wallet, but you can learn a lot about a person by what they do.
If I stayed in my own lane 24/7, I would’ve never learned about the amazing discount thrift shops I can buy my $5 t-shirts at and $30 rain and winter-proof coats without breaking the bank at the Canada Goose store my other friends have.
Since my parents always shopped at J.Crew and didn’t venture out as my new friends do who’ve lived on the other side of the city, I was oblivion to the fact that there is something cheaper than a $400 cashmere coat without researching extensively and paying for rip off clothing somewhere deep in the NYC jungle.
Expose yourself to diversity becuase that is the key to a diverse portfolio and closet.
Get out of your comfort zone and learn from others.
Don’t do everything they do or follow them but learning what new trends are in and the unpopular shops that exist never hurt.
—-
After busting the myths, I would like you to think back to when you told yourself you shouldn’t buy something.
Most likely it was due to not having enough of our most prized possession and what always holds us back: money or the shift didn’t look flattering or the dessert didn’t taste good.
Money in itself is a barrier.
Our beliefs entail that it can bring us more happiness if we have more stuff around us even if it doesn’t make us more productive or improve our lives.
It is tempting to say that it does bring success and happiness but as someone who has grown up in a moderately wealthy neighborhood and family, I’ve seen how appreciative we are with living frugally, below our means, and acting as if we had nothing.
Less is truly more.
Okay, now let’s cut the #inspo and get to the real stuff.
I cannot persuade you to spend less but if you develop these habits, I can assure you, at least a few of them will rewire your brain about spending differently.
Everything is Weighed Equally
When I purchased my first laptop, obviously I knew it cost $2k more than my mouse pad or keyboard but when I started to associate everything as the same price, I questioned everything I bought in a more strategic way.
Off the bat I felt more reasonable and smarter, changing nothing except for an imaginary price.
It made sense and I started to calm down and felt appreciative of what I had.
I knew I obviously needed a mouse and keyboard but before thinking that they were 3% of the 2k price, I figured I needed a case, a screen protector, and a sparkly mouse to make me happy, for no absolute reason just becuase they were less expensive.
Now don’t get me wrong, this is hard to do.
A house is not a water bottle and a couch is not a pair of running shoes but making everything a little bit more exaggerated in price, never hurts anyone, especially your wallet.
The trick is to slow down, imagine if you would use it and how prized it would be in your life.
Skip the Typing and Spreadsheets
We are attached to our phones 24/7.
Did you know they are dirtier than a toilet seat?
Ok, sorry if that ruined your day but it’s true.
Let’s utilize them to our benefit then!
Log off the social and Uber, and start using your time and money effectively through that phone.
If you aren’t the quantitative, Excel visualization type, don’t sweat it.
There are hundreds of apps you can download such as EveryDollar (I’m not paid to say this) to coordinate your spending into a portfolio.
But remember: the simpler the better.
Don’t let this occupy your time or mind as much as it should because you cannot think of it as budgeting.
It has to be fun or it won’t work.
What I use is my built-in iPhone calendar.
The way I do it is by each event, I write down a note if I will spend money there or not. It doesn’t even have to be the amount. Just yes or no.
Instead of at the end of the day writing how much you spent, for each event, activity, or before the day, in teh calendar event or side note, header, footer notes, write down how much you plan on spending, not how much you did or want to, but how much you plan on doing so and at approximately what time.
That will give you a better sense of what’s to come in mind for and if you don’t stick to what you wrote, you will naturally be disappointed and want to follow it for the next day.
This will make you want to set up gradual improvements.
Be a _____
So you love Starbucks coffee and SoulCycle but you feel guilty every time you sip that cappuccino or swipe to ride becuase you wasted money long term for short term gains, no need to panic.
Your life isn’t over and it should be more exciting because you want to make an improvement.
Understand what you do that is causing your spending to rise.
It has to be the cause of something and it isn’t a secret.
If you deeply enjoy exercising with your friends, you need to be creative.
There are thousands of ways to get active with a group besides in a hot sweaty, expnsive dark room.
Go outside, buy weights or do squats at home.
You are paying for the motivation, not the exercise itself.
Or with coffee, invest in a cappuccino maker to make 30 cents coffee instead of wasting 30k per year on coffee so you can use that to live a more fruitful life when you retire or enjoy a vacation at the end of the year.
To make a change, you have to be uncomfortable and make mistakes.
Be creative and you will enjoy your results and feel the best about yourself
You Have To Live
Buying a breakfast sandwich twice a week isn’t terrible for you unless it has bacon fat.
We assume that just because we can make it at home, it should never be purchased outside of our house.
So does that mean I have to sew my own clothes and take a wagon to work?
You have to weigh the opportunity cost.
If you are rushed in the mornings and don’t have the energy, time, or ingredients to make a sandwich before work, it will save you a lot of ease to spend that money.
What works for someone doesn’t work for you.
Living frugally isn’t taking everything that is working and spinning it around.
It is understanding what makes your life easier and let it work for you not against you.
That subway ride can add up every day but then you aren’t sweaty, gross, tired, and exhausted saving $12 walking 5 miles to Wall Street from Grand Central.
Be realistic and prioritize what works not make it seem like the worst decisions becuase it doesn’t work for others.
Change is Slow but Money Is On The Line
The hardest part about being is entrepreneur is knowing that you must sacrifice short-term goals, friends, time, money, and waste it all for possible high incredible rewards and returns in the long run.
But there is also a high failure rate and in that case, you accept that you learned a lot through making mistakes, the best way to learn.
Having that mentality is key and as a result, most people don’t want to go there because they are comfortable.
You must be uncomfortable in order to grow and it will never happen if you take large, unrealistic, unattainable leaps.
Don’t strive to lose those 60 lbs by Valentine’s Day because your life will be miserable and you will be more sluggish and annoyed you need sugar to keep you alive.
You won’t save 2k per month. You can do it much more easily in a year and next year in a month.
Moderation along with patience is a virtue.
Prioritize it and take baby steps.
Don’t focus on eliminating your subway fees, coffee orders, GrubHub dinner delivery, and clothing haul all at once.
One step at a time because multitasking or cramming never works.
Be You
If you are the competitive type, set a competition with your friends to see how much you’ve saved.
Just like you bet with sports or the Kentucky Derby, in the end, whoever saved the most doesn’t have to pay for the next outing or adventure with your pals!
If you have a goal of saving 2k per month, see where you spend the most time on and pinpoint it.
Make it fun and rewarding.
Your bills aren’t hiding from you.
They are all there.
Our daily schedules are 95% of the time the same.
Pinpoint and dissect what are those charges that are those hefty liabilities in order to make your life easier, simpler, and financially healthier for the future.
Through these sneaky but fun tricks, I’ve made budgeting a day to day activity I do that gets me excited to keep more.
It’s not about how much you make. It’s how much you keep.
If you earn like a rich man but spend like an uneducated one, you will be in financial hardship.
Each night I look forward to seeing how much I can spend.
Especially these days, saving is much easier than spending so see what progress you can make during this pandemic.
Regardless if you are in dire situations or have a stable job, you always need to plan for the worst during the best so you can be stable during the worst times.
That is being different from the crowd not sticking with what most people do who struggle during a recession.
Find inspiration from others but be able to understand where you want to go and accumulate at the end of the year towards savings.
Impress yourself and that is the stickiest budget.