The season of spending is officially over, and now is the time to get your finances back on track. If the thought of tackling your debt or creating a budget sounds overwhelming, break it down into easy to manage steps. Mark Butler, outreach director atYouNeedABudget.com, shares his tips.
1. Build momentum with small victories.
It’s tough of wrap your brain around huge, long-term goals like retirement or saving for a down payment on a house. If you’ve never been very good at saving money, start small. Before you tackle goals in the tens of hundreds or hundreds of thousands, get some hundred-dollar wins. For example, pay off a small credit card balance you’ve had floating around, save up for that new iPad or Macbook Air you’ve had your eye on, or plan a weekend road trip with a few friends a couple months in the future.
2. Remind yourself of the goal at least once a day.
It’s crucial that you see saving money as something positive and goal-oriented, not an exercise in self-deprivation. When you’re faced with the desire and opportunity to consume wastefully, remind yourself of your goal. That way, you’re not depriving yourself of one thing; you’re rewarding yourself with another. It’s a small but powerful change in perspective that can make all the difference to developing the saving habit.
3. Use a budget.
People wrongly think of budgets like diets. A budget is nothing but a plan for how to use your money, and it’s the perfect tool for making sure as many of your dollars as possible go to your most desirable goals. Next time you get paid, ask yourself, “How much of this money could I set aside to reach my goal?” With a functional budget, you’ll have a clear answer in seconds. If you choose to spend by the seat of your pants, it will be tough to know how much — if any — of your paycheck can fund your goal. So, forget antiquated ideas about budgeting. Create a spending plan and use it to assign dollars to your highest value priorities.
4. As you gain smaller victories, scale your goals.
Steps one through three will give you those hundred-dollar victories. After you’ve successfully saved up for the new iPad or paid off that $500 credit card balance that’s been nagging you, you can take your saving to another level. Set slightly bigger goals. You’ve already proven you can delay some gratification — now it’s time to beef up your saving power by going for longer-term goals.
Here’s the secret about saving money most spenders never discover: It’s addictive. Once you get a taste of the satisfaction of setting and achieving a financial goal (with the corresponding self-esteem boost), you’ll want more. Soon you’ll find yourself setting aside big chunks of your paycheck for bigger and more exciting goals.
Not only will you enjoy the stress-free consumption of the chronic saver, you’ll have cash in the bank ready for life’s biggest and most important purchases, like retirement.