When it comes to finding balance in your spending, standard advice says that you need to make a budget. How successful is that? One survey found that 74% of consumers say they have a budget, which I personally believe is high. That survey also found that 79% fail to follow the budget, going over on average $7,400 per year.
So, how can we flip the script on this story and stay on budget?
We break down how you can create a saving and spending plan that sticks.
What Is Balance?
To me, finding financial balance is finding that point where you are living for today, yet setting yourself up for success in the future. Day by day, there are opportunities everywhere to spend your hard-earned money. Boats, vacations, restaurants, Amazon, etc., there are temptations literally at every corner. Unless you plan to work forever, it’s important to enjoy life in appropriate moderation while preparing for the future.
On the other end of the spectrum are people who have a hard time spending money, yes, they exist in larger numbers than you would expect. Whether it’s because they are engrained to saving habits, or they have had some financial hardship that makes them worry about the future, they are constantly focused on the future. While I argue that’s a better problem to have than over-spending, this group of people may miss out on opportunities to upgrade their lifestyle and create memories by being overly tight.
It’s a balancing act. Creating balance in your spending starts with creating direction and then adjusting along the way because, as we know, life happens. Circumstances might change where saving money isn’t possible for a period. On the other end of the spectrum, you may experience a windfall that takes care of some savings goals. The point is, there will always be events or things that come up that we didn’t plan for, both good and bad.
The real purpose of thinking about saving and spending as a balancing act is that it allows you to have parts of both. You can live the life you want while also meeting goals – it’s just about doing both with intention.
Clarify Your Purpose & Goals
It can be tough to prioritize saving when there are so many opportunities to spend but uncovering the ‘why’ behind socking money away can help create deeper meaning and purpose, making it easier.
One way to do this is by tying your savings to a tangible goal. Big goals, like saving for a second home or college, are, of course, the gold standard here. But setting and reaching smaller goals that are achievable in short time frames is a good way to get a positive feedback loop going, re-affirming the “why” behind savings.
It’s much easier to stick with a plan when you establish a specific goal and build a plan around it because you can see the progress over time. You can use that defined goal as a North Star to keep you on track, rather than trying to save money with no end or reward in sight.
Make & Revisit Your Plan
After you’ve laid out why and what you’re saving for, you can begin creating a plan that makes it possible to enjoy life today while still saving for the long term. Remember that no plan is perfect, and adjustments will need to be made over time when getting started. The most important thing is to get started and build momentum in the right direction.
One of the first steps to finding balance in your spending is to figure out how much you need to spend each month to cover regular expenses such as housing, bills, food, and entertainment. You can start by reviewing your last few months of spending. Then determine how much your goals cost and what savings you need to fund your future lifestyle. Once you have those numbers, you can then figure out how much you need to be saving each month and each year to reach those goals.
As an exercise to get to the number that works for you, try to set three scenarios – minimum savings, maximum savings, and a compromise between the two. Minimum savings will allow you to make minor changes to spending; maximum will usually entail significant cuts to current expenditures. Seeing it all on paper can make it easier to decide what to cut. It also gives you a document to go back, review, and a way to hold yourself accountable.
Everyone has a different amount of savings that is right for them. This is where rules of thumb are thrown out the window and planning comes in. Most likely, the initial plan won’t be perfect. You should revisit your savings plan to make necessary changes and ensure everything is still on track.
Pay (or Tax) Yourself First
If you struggle to save money consistently, an effective way to build a savings habit is by paying yourself first and automate your savings. One way to think about it is like putting a savings tax on yourself. For example, you could automatically transfer a certain percentage of your paycheck to your savings account every time you get paid, just like how 401(k) contributions are made before you receive your paycheck.
This helps remove the human component of making the savings transfer each month. The best part about paying yourself first and saving money before anything else is that your savings goals would already be taken care of. Automatic savings can also allow you to be more comfortable spending some of the remainder.
In addition to this strategy, using a budgeting app such as Mint or You Need a Budget can also help keep spending in line. These apps automatically keep track of transactions and can alert you when you’ve maxed out spending in specific categories for the month.
Whatever approach you decide to take, maintaining a balanced spending and savings plan comes down to getting clear on what’s important to you and being intentional with your spending. It is important to set up a plan that fits your lifestyle and make adjustments along the way.
When it comes to personal finance, a lot of things are out of our control. We can’t predict stock market returns or interest rates changes, but we do control our spending and saving habits. Finding balance in your budget isn’t about being perfect. It’s about being flexible, taking the right actions, and adjusting as life changes.
We never know what tomorrow holds, but by creating a financial plan that prioritizes living for today while still stashing away money for the future. You can do it!
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