We all love to shop for a good bargain, but for many people, the word “budgeting” strikes even more dread than dieting. Many people start with the best of intentions (can anyone say “New Year’s Resolution”?), but once they’ve created a budget, it can be tough to actually stick to it. Why? Because, like a diet, a budget that’s only built to deny yourself is no fun!
It’s much easier to stick to a budget if you find the right balance of discipline and incentives. There is no one-size trick to finding a savings plan that you’ll stick to, but there are a few psychological tips to make budgeting a little easier (and more rewarding).
Here are some budget tips you’ll actually want to follow (and none involve cutting back on ice cream):
1. Gamify Your Budget
Psychology shows us that we really do respond better to rewards, recognition and incentives than we do punishment. That’s why the 52 Week Money Challenge (and its variants) is so popular. The objective of the game is to start with a tiny amount of savings each week and increase the amount each subsequent week; it starts easy to give you a sense of accomplishment, and you “level up” every week.
2. Subject Yourself to Peer Pressure (the Good Kind)
If you have trouble sticking to the game, try setting up competitions with friends to see who can reach goals the most consistently. A little accountability (read: peer pressure) can help keep you on track too.
3. Pay Yourself First
You know how you always intend to save whatever’s left over at the end of the month, yet there’s never anything left over? Try this powerful budget tip: “pay yourself first” (instead of paying yourself last with whatever’s left over). Figure out a reasonable amount you think you should be able to save and then transfer that money out of your checking account and into savings. Treat this the same as you would any other bill that needs to get paid. As the month draws to a close, you’ll naturally need to tighten your belt a bit more, but you’ll have a lot less temptation since you don’t see “extra” money sitting around.
4. Embrace the Envelope Method
The envelope method is a way to assign every dollar in your budget to a spending category. In a literal envelope system, you put cash into physical envelopes that you pull out when you pay for things. If that’s too cumbersome, you can create a virtual set of envelopes and do all your allocations using an online budget system (or a file you keep on your computer or phone).
When the envelope is empty, you can’t spend in that category anymore; in an emergency, you’ll have to transfer cash out of a different envelope. This makes budgeting a tangible zero-sum activity, and you become hyper-aware of how much money is left.
5. Split Your Savings
Use the envelope budgeting tip to save up for long-term goals like a fun (yet frugal) trip or a car, too. Rather than mashing your emergency fund, down-payment money, vacation savings and unanticipated expenses all together into a single savings account, where you’re never quite sure how much you can really safely spend on what, you can create multiple accounts with separate goals for each.
There are a few online banks that understand how to tap into this psychological trick, and they make it super easy to create multiple savings buckets at a click of a button. They even prompt you to set up automatic savings every month and track your progress for you.
6. Round Up Your Change
The little things add up! The old fashioned way to save your change was to use a piggy bank, but now that plastic is the currency of choice with many consumers, several banks have an option to transfer the “loose change” from every debit purchase into a savings account. Every purchase gets rounded up to the next dollar amount and the difference is deposited into savings. If you don’t have a bank with such a program, or you don’t think that’s aggressive enough, you can do this yourself by rounding to the nearest dollar (or more) for every purchase and earmarking that amount for savings on a weekly basis. Add this tip to your list of new year’s resolutions that save you money and watch your piggy bank grow.
7. Watch it Weekly
Whether you could paid monthly, twice a month or every other week, we often tend to feel the biggest crunch in the days leading up to the next paycheck. If you feel a huge sense of relief on payday, and you go out and splurge to celebrate, you may be living a paycheck-to-paycheck life. (Let’s not be about that life).
Luckily, stopping this nasty cycle is manageable. Begin by creating little mini-budgets with shorter timeframes because we’re much better at sticking to easier and shorter term goals than huge lofty ones that are far off. So, to ensure you don’t run out of money before you get paid next, try budgeting your discretionary spending in weekly chunks instead of monthly chunks. Just don’t forget to keep an eye out for those annual or irregular bills too!
Don’t Forget to Reward Yourself
You can pick and choose any of these budget tips to try out as a means to increase your savings habit in 2016, the important thing is just to stick with it. But no set of budgeting tricks is complete without a way to reward yourself. Keep a Mini “Fun” Fund to reward yourself when you hit your goals — or just because you’ve saved enough to do so. So go ahead and splurge on that new (insert guilty pleasure here); just do it with money you’ve already put away for that purpose.
I hope these ideas for how to budget will help you supercharge your goals! So what are you saving for? Tell us in the comments.