financial goals

How to Take Control of Your Spending This Year, Part 4: Budgeting and Tracking Your Spending

Budgeting and Tracking Your Spending

This article is part four of a four-part series to help you reduce your spending this year. In part three, you identified what triggers your overspending habit. This week, I’ll share tips and tricks for budgeting and tracking your spending.

Budgeting and tracking your spending can provide benefits beyond simply saving more money. It also allows you to invest more, pay off debt more quickly, and even retire earlier in some cases! Plus, it can offer a sense of control and accomplishment and reduce financial stress.

Setting a New Budget

Previously, you identified how much you spent in the last 12 months on your spending weakness. Now, it’s time to set a new budget for the next 12 months.

Of course, it’s helpful to choose your new spending goal within the context of a comprehensive cash flow and financial plan. However, to keep the task smaller and more doable, I suggest setting a budget of at least 25% less than you spent the previous year on your spending weakness.

For example, if you spent $10,000 last year, set a budget of $7,500 for the next 12 months. Reduce by a more significant percentage if you feel like your spending was way out of control last year!

Depending on your spending weakness, it may be helpful to set a monthly budget instead. For example, if clothing is your weakness and on average you spent $1000 a month last year, your new budget will be $750 a month. Setting a monthly spending limit rather than a yearly goal may help you stick your budget longer term.

Tracking Your Spending

Once you’ve decided on an amount, you need to create a system for tracking your spending.

You can accomplish this task either digitally or manually; the most important thing is that you do it on at least a monthly basis. If you wait until the end of the year, you lose the benefit of being able to modify your behavior if necessary.

One idea: Save all your receipts in a folder (online or physical). Then, at the end of each month, add them to a spreadsheet and subtract the total from your total budget. Another idea is to download an app like Mint or Goodbudget that tracks and categorizes your spending.

How to Stick to Your New Spending Plan

Budgeting and tracking your spending are indeed important steps. Yet it takes focus, patience, and perseverance to actually stick to your new spending plan.

In other words, changing your behavior is hard. To get your spending under control once and for all, you’ll need a set of tools and resources that support you in achieving your goal.

Here are a few ideas for changing your behavior and creating new, healthier habits:

  • Find a replacement activity for shopping. When you think about going to a store or hopping on the internet, read a book, call a friend, or watch a movie instead. Choose something pleasurable and stimulating that doesn’t cost money.
  • When you go to a store, be prepared. Make a list of what you want to buy and stick to it. This preparation will help you avoid impulse purchases.
  • Delay your purchase. Take a day or two to think about whether you need it.
  • Avoid peer pressure. Don’t shop with friends who encourage you to buy things you don’t want or need.
  • Don’t tempt yourself. Plan different routes when you are out and about to avoid your favorite stores and unsubscribe from email lists that entice you to spend money.
  • Find a new hobby that doesn’t involve spending a ton of money. For example, play a new sport, start a creative project, or learn to play a musical instrument or speak a new language.
  • Keep your goals front-of-mind. Add a sticky note to your laptop with your budget goal, or read books and articles or listen to podcasts or audio books about habits, conscious spending, and personal finance.
  • Practice self-awareness. When you are angry, tired, sad, or frustrated, go for a walk or meditate instead of shopping. Keep a journal about your experience and emotions while trying to change your behavior.
  • Repurpose your discretionary funds. Take some of your savings and donate to your favorite charity.
  • Hold yourself accountable. Tell your friends that you are trying to cut back on your spending and want their support, or hire a coach or financial advisor to help you reach your broader financial goals.
  • Visualize your future self. Think about what you’ll gain if you get your spending under control. Then, create a vision board depicting what you see and how you feel.

What Will Motivate You to Stop Overspending?

In addition to changing your behavior, you may need to adjust your mindset around spending altogether. Otherwise, it’s easy to slip back into bad habits.

One thing I’ve found helpful when trying to create a new habit is to identify my “why.” In other words, why is it so important to you to get your spending under control? What are you giving up by overspending? What’s the opportunity cost?

Some of you may want to retire early, but your current spending is keeping you from doing so. In effect, your spending habit may be keeping you from spending more time with your family, pursuing your lifelong dream of writing a novel, or just feeling more at ease on a daily basis.

Or maybe your why is to get out of credit card debt. Instead of putting hundreds or thousands of dollars each month towards your credit card balances, you could be contributing that amount to a retirement account, HSA, or donor-advised fund. You may also sleep better at night knowing you’re debt-free.

Take time to journal about what why you want to stop overspending and what it would feel like to get your spending under control. Then, ask yourself these questions: What would I do with the time and money I save? What could I accomplish instead? How would my attitude about myself change?

Budgeting and Tracking Your Spending for the Long Run

Lastly, people tend to be motivated by what they value. Ask yourself if your current spending aligns with your values. If not, this can be a powerful motivator when it comes to budgeting and tracking your spending.

If you aren’t sure what your values are or need some prompting, consider downloading The Happiness Spreadsheet. This free eBook is full of exercises to identify your values and align your spending with what matters most to you. It also has a list of other helpful resources to guide you in getting your spending under control.

If you’ve been following this blog series, I hope you now have a strong foundation to create healthier spending habits in 2023 and beyond. You may also find the other resources on my website helpful as you continue your personal finance journey.

Lastly, remember we’re in this together. Please feel free to connect with me, keep me posted on your progress, and ask questions.  

Good luck, and here’s to a prosperous 2023!

Download my FREE E-BOOK: How to Take Control of Your Spending This Year

Love this blog series? Download my free e-book, How to Take Control of Your Spending This Year, for tips and strategies you can quickly put into action to get your spending habit under control.

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5 Ways to Boost Your Financial Confidence

Boost Your Financial Confidence

In many aspects of life, confidence is key. But if there’s one category where that emotion is often lacking, it’s financial. Fortunately, April is National Financial Literacy Month. To celebrate, this month’s podcast episode features Jennifer Barrett, author of Think Like a Breadwinner. In addition, I’m sharing some tips of my own for how you can boost your financial confidence to shift your money mindset.

Five steps you can take right now to boost your financial confidence:

1. Face Your Finances

Regularly revisiting your budget, checking in on your accounts, and tracking your net worth are three tasks that any financial advisor would recommend. And for good reason. These tasks may seem simplistic, but they provide you with a solid financial foundation. Moreover, getting a routine down for the basics will also help boost your financial confidence when it comes to tackling larger tasks.

2. Educate Yourself

There is an incredible number of ways to improve your financial literacy. And with the rise of personal finance blogs, podcasts, books, and courses, it’s easier than ever to get your hands on the information you need.

For instance, Curtis Financial Planning’s website contains the Of Independent Means blog and the Financial Finesse podcast, as well as several free downloads and other resources. In addition, the Balance has compiled a handy list of the 10 best personal finance books of 2021.

3. Know Your Worth

Have you gone a year or more without a cost-of-living raise? Or have you recently changed positions, taken on more responsibilities, or spent time honing your skills? If so, it’s time to negotiate a higher salary. Indeed, growing the gap between your expenses and your income will boost your financial confidence. However, it can also help you meet many common financial goals.

Just be sure to do your research to find out how much others in your position are making. For example, websites like Glassdoor will give you the average salary for your position and location. In addition, you can add in your years of experience to get a more specific answer.

4. Set Financial Goals

Two common financial goals are putting together a budget or spending plan and paying down debt. These two tasks go hand-in-hand, and they’re vital for a healthy financial future. Other examples of financial goals include:

• Starting an emergency fund
• Saving for retirement
• Paying off your mortgage
• Funding a dream vacation

Setting financial goals offers a daily reminder of what matters more than emotional spending or convenience purchases. No matter your financial goals, facing your finances, increasing your knowledge, and knowing what you’re worth can help you get there.

5. Partner With a Financial Advisor

Nothing offers a bigger, better, or faster financial confidence boost than partnering with a knowledgeable financial advisor. To get started and cross one thing off your financial to-do list, download The Happiness Spreadsheet. This incredible free resource offers a unique approach to budgeting by aligning your spending plan with your values.

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