How do you budget without creating all the icky feelings? The feelings of lack and limitation. The feelings of coiled spring anxiety.
How do you find ease?
The trick to ease filled budgeting is to start, well, easy.
First off, show your money some love. Pay attention to it. How much do you have? How much is coming in? How much is going out? Amplifying ALWAYS starts with a radically honest self-assessment of where you’re at. Always. And radical. Write it all out. Be grateful for what you have. Make friends with the calculator on your phone. Answer the following questions:
- Are you spending more that you’re earning?
- Do you pay off your credit card, in full, every month?
- What savings do you have? How much are you adding to them each month?
Comb through every bank account (current and savings), credit card, pension plan, investments. Be nitty gritty. Radical honesty remember?
Now you know what you’re at in gory detail, it’s time to find the opportunity in your situation. To play along, you can find the worksheet here.
Take your last three months of spending. We’re going to classify your spending into Joy Fueled, Necessary and No Joy. The easiest way to do this is to print off your bank statement and grab three different coloured highlighters. For each line on your statement, ask yourself, did spending this money bring me joy? This only works if you’re radically honest with yourself. The latest Urban Decay palette that everyone’s raving about but you’ve never opened? Doesn’t count. Start to notice patterns. Food with friends will be different from grabbing work lunch. Once you’re done, tally up how much you’ve spent in each category. If you want to get super fancy, you can calculate the percentage of each.
Where do you consistently spend money and get value from it?
Where do you consistently spend money and NOT get value from it?
That money right there is your opportunity. You can reallocate that money and not lose out. You’re already not getting joy from it so you won’t notice when you spend it on something else. Like debt. Or not spend it at all.
The next big question is where to reallocate it to? Now you know where you’re at, its time to know where you’re going.
Start out with open dreaming. Brainstorm to your heart’s content. Write out every single dam financial goal you can think of. Pay off the credit card. Have six months living costs in the bank. Be able to afford Sophia Webster heels. Start investing. House. Wedding. Travel. Save goodbye to your student loan. Consolidate debt and get in control. There are no bad ideas. Let it all out. This is not the time for filtering.
Maybe take your time here. Let it percolate for a day. Come back to it. What ideas stay front of mind? What feels like an obligation? What feels goooooood and motivating?
Time to prioritise. If you have debt, this needs to be on the shortlist. Make sure you know the interest rates on your debt, credit card, and various savings accounts so you can make informed decisions about where your money needs to flow. Sometimes if the savings interest is higher than the debt interest it can make sense to prioritise savings. But if that sentence has you bamboozled, stick to getting rid of debt at priority número uno.
Make sure you have no more than three priorities. Ease comes from clarity so don’t try to do too much at once. Currently, my financial goals are:
- Pay off my student loan
- Pay back my parents
- Create an emergency cushion
My goals are pretty sensible. I suggest having a fun goal, like a big holiday or extravagant purchase. Give yourself something to look forward to. A reward for good behaviour if you will.
Take your opportunity money you identified during classifying your spending, and reallocate between your priorities. This doesn’t need to be an even split. Maybe you want to pay down debt ASAP but have decided to squirrel away a small amount for a girl’s trip. The split needs to reflect which goals take precedence and the size of the individual goals. Don’t get hung up on deciding the ‘perfect’ amounts. The idea is to make progress and as you learn, you can adjust.
The final step is to make sticking to your new allocations easier than your old habits. For a long time, I carried cash, giving myself a set amount each week for buying lunch, going out for dinner and other non-essentials. I didn’t keep a close eye on whether it was on joy filled or not, but once it was gone, it was gone. Now, I have a separate debit card but I still use it in the same way.
Ways you can automate the right thing:
- Take out a set amount of cash and define what that money is for.
- Set up a separate savings account and a direct debit of your target savings amount that occurs when you get paid. If you never see it, you won’t be tempted. And eventually, won’t miss it.
- Automatic payment of bills, credit cards, debt.
- Have multiple current accounts for different expenditures – travel, essentials, shopping.
Know your buckets for each area and find a way to stick to it. This will take trial and error. When things don’t go to plan, don’t beat yourself up. Figure out why you deviated and adjust accordingly. There are no mistakes, just learning opportunities.
Always be tweaking and refining. Learning more about your spending habits. Revisiting what is joy filled spending and what isn’t. This isn’t a process you can do once and never return to. But the more you do it, the more you play, the more you learn and the more easeful it will be.
Remember to always come back to ease. We focused on reallocating non-essential, no joy spending because you won’t miss those purchases. There’s ease because you’re in control.
If after awhile, when you’ve got a healthier relationship with money and are in more control, maybe you’ll want to reach your goals faster. To do this takes more radical change. Where can you cut back on essential spending? What subscription payments have I got going out and do I use those services? What short term joy are you willing to sacrifice in order to achieve your financial joys? Whatever you choose to focus on, the process is always the same:
- Where am I at?
- What are my goals?
- What changes am I making to achieve my goals?
- What systems am I putting in place to help me stick to my decisions?
Finding ease in money requires understanding that every decision is a trade off. When you spend the money in one place, you forego spending it somewhere else (in economics this is called opportunity cost). Five things from ASOS or a skirt you’ll keep for five years? Concert tickets or new shoes? A $10 donation to your favourite charity or a cocktail with the girls? There’s no right or wrong, there are just choices. And making informed ones.
Ready to start your easeful budget? Go here to get your worksheet.