Sometimes, we all go a little off the rails with spending. It could be a few unexpected major expenses – the car breaks down or something goes wrong in the house that needs fixing. It could be that several large expenses collide at once, such as paying for a holiday and a deposit needed for accommodation, or it could be that you’ve just been being a bit ‘spendy’ here and there and it’s all added up to more than you thought. As an action-oriented person, you want to get control of the situation before it spirals any further. You need to make a plan and fix the issue as soon as possible.
It’s important, however, to let go of too much guilt around times of occasional overspending. Everyone has moments in their life when circumstances conspire, and expenses add up. As long as the financial bad practice doesn’t become a habit, there’s no need to be too consumed with guilt over seasonal overspending. Switch gears and create an affirmative change plan that will help you out of difficulties and establish a better position for the rest of the year – think of it as a financial spring clean!
Change Your Thinking
It doesn’t matter what your goals are – if you don’t have the correct mind-set, your plans may never work. If you’re over the opinion that anything to do with budgeting means a miserable, joyless existence, it’s never going to be a comfortable state to be in, and consequently, any budgeting moves you make are likely to be short-term. Instead, you need to think about money making as a skill, and something you can become good at and take pride in doing. Having negative associations around acquiring, spending and saving money is no good. You need to retrain your mind to think of money as a tool – neither positive nor negative in itself – but something that allows change to happen. Changing your internal dialogue is a little bit ‘fake it til you make it’. You must tell yourself that you are good at money management, that saving brings you security and makes you feel empowered. Educate yourself about the psychology of personal finance and use it to strengthen your position. If you tell yourself you are good at saving often enough, you will become that way over time.
Review Your Budget
Many people plan out a budget, but then never revise it. The truth is, our personal finances are an ever-evolving picture and must take account of our financial personality type. Income and expenses ebb and flow like a tide, and changing life circumstances take their toll on our planning and our available funds. Revising your budget is an activity that should take place on a frequent, if not paycheck by paycheck basis. What you need to be aware of when planning is moderation. Many think that budgeting involves never being able to spend on a takeout coffee. But budgeting doesn’t have to be parsimonious. It’s actually about finding a working balance – something that allows enough money for an occasional treat, but also ensure that doesn’t creep into becoming a daily indulgence. Your budget analysis will help you to identify areas that may be in danger of spilling over into becoming a vice, and you can then address those. Make room by chipping away at these smaller, regular expenses for a ‘cushion’ instead. A ‘cushion’ is a pocket of unallocated money that stops you from running into unexpected difficulties or hitting your overdraft at the end of every month. Developing this gives you a measure of financial freedom and peace of mind – and those are the end goals of any economic spring cleaning. If you don’t know where to begin, a personal budget calculator can be a handy tool.
Set Up Reminders and Automated Payments
Use the power of technology to streamline the money processes in your home. Your budget review will have helped you to identify precisely what payments need making and when they fall due. The next step is to make sure you’re in a good position to stay on top of them. Make good use of the calendar app on your smartphone and enter in all the dates that these payments are upcoming, allowing a day or two for the payment to clear properly. Most payments these days can be automated, and if it’s an option to do so, you must use it to avoid late payment blots on your credit record and accumulated fees. A lot of people like to keep credit, business finance and other big obligations with one provider, like My Partnership Bank, to keep better track of them.
Pay Yourself First
A great general rule is to get into the habit of ‘paying yourself first’, a financial concept advocated by many experts in wealth management. This means prioritizing a savings goal before the round of monthly spending has taken its toll – before the dinners out, that crucial pair of boots you just ‘had’ to have. You will commit to meet your financial goal first, and work the rest of budget around that. It prevents you having great intentions, then getting to the end of the month and realizing there’s just not enough left to top up your pension fund, add to your savings account or make the extra payment on that credit card that you promised yourself. Set aside that potion of your income on the very day you get paid – or use automated payments to have the money moved into savings before you can touch it – and you’ve paid yourself first. The process then becomes a lot less painful. Having enough money set aside for emergencies doesn’t have to be unattainable – it just has to be a priority over other discretionary spending.
Financial change is something that ultimately gives you back the power. Don’t regard money as something that you can’t be in control of – take a few positive steps and find that balance that works for you. The rewards regarding peace of mind are definitely worth any temporary discomfort caused by adjusting to new practices.