Budgeting Part 2 – How to Stick to Your Budget

Habits

In my last post I talked about how to make a budget. That’s really just the first half of this whole process. Making a budget is important but what do you do once you have it? You have to stick with it for it to work. And sticking to a budget is one of the most challenging things for people.

Quick note: this is a big post. Take your time incorporating strategies and definitely don’t try them all at once. This is also a good preview of the strategies clients have found useful when working with me.

Why Do Most People Have Trouble Sticking To Their Budgets?

Simply put it comes down to them spending money on things that aren’t on the budget. They do this generally because of impulsive decision making. Therefore, learning to control impulses and build a positive habit around spending is going to be key to your success. 

Sometimes it’s because their budget isn’t in-line with their goals. Others it’s because their budget isn’t realistic for them to hit.

“Beware of little expenses. A small leak will sink a great ship.”

Benjamin Franklin

I’ve got a few methods I use for making it easier to stick to so that’s what I want to show you today. These are things my clients utilize when we work together. All are things I’ve personally tried at some point and found some level of success in, some more than others. I’ve found what works for me and you’ll have to do the same. Some are general mindset related, some are habits, but ALL are helpful at getting you to take consistent action towards your goals. 

At the end of the day, sticking to your budget comes down to resisting impulsive decisions that you haven’t planned for. That’s really it. 

#1. Tracking Spending

Even if you impulse buy or you’re short on time, I think it’s best when starting out to find a way to track your spending. Until you get better with money this is the best way to be hyper-aware of your spending.

Physically write it down on a piece of paper, put it into a spreadsheet (maybe a section of your budget could be for this), or download an app that can do it automatically for you. If you go the app route, make sure you get into the habit of checking it very often up front (to simulate you actually tracking it). 

At the end of each month you’ll want to review your spending. Ideally you will have already written it all down on your own. That would be a good indicator that you’re aware of your spending and at least in some control over it.  

#2. Find Quick Wins By Identifying Low-Hanging Fruit

Lifestyle habits are more difficult to change and take more time to implement. Most everything in this post (including tracking spending), I’d consider in the realm of a habit or mindset shift, which to me are lifestyle changes. Their pay off is huge. However, it can be just as big of a win to get the ball rolling immediately by finding some easy things to cut down or out.

Comb through your budget to try and identify anything that severely sticks out to you. Sometimes this is really difficult for people because they lack objectivity. This is where someone like a coach can come in as an unbiased third party to provide honest feedback about your budget.

I don’t recommend asking your spouse, friends, or family. Your spouse should be part of the conversion around money, yes, but they might not be very objective either. If they are then fair enough but I still recommend a more detached person to give their opinion. You may not want friends or family to know your intimate personal financial details like that. 

Alternatively, you can join our Just Stop Spending Community on Facebook. Here you can interact with me and other members and get answers to your questions.  

Back to easy wins – If you’ve got multiple streaming services, perhaps cutting down to 1 temporarily. When is the last time you shopped for a new cell phone plan or car insurance? Are you sure you need the premium service? Or the mobile car detailer to stop by your office while you’re at work?

Look for other things that stick out. For me, the first thing was my mortgage. And since the house was quite large, all of the bills were naturally higher since it cost more to heat and cool (and Texas summers are hot). 

If you’ve racked up some credit card debt but don’t have terrible credit, a balance transfer may save you hundreds or more in interest. These are just a few examples to get your thoughts going when looking at your own budget. 

#3. General Mindset Towards Budgeting

Once you have the awareness that it all comes down to resisting impulses, you can begin to implement various strategies and tactics to combat that. So what are some ways we can avoid impulsivities? First I want to talk about the general mindset I have towards goals. Since a budget is an action plan for your financial goals I think this will be really helpful for your success. 

You’ll notice the “Formula for Success” is a common theme here at JSS. 

Action + Consistency = Success 

It’s on my website and there will be a future post elaborating further. I’m three blog posts in and it’s been mentioned in all three. It’s around so often for good reason. It’s how I personally simplify, visualize, and define success so it’s easy for others and myself to understand. 

Your budget is your goal post. It’s a summary of your financial goals that encapsulates your life goals as well. We know that if you match your reality to your budget you WILL have financial success. Therefore your consistent actions are the key to your success here financially. To me this is the way to go, versus constantly thinking about how much debt I am in. I prefer to come up with a plan and focus my efforts on sticking to it. 

Adopting this simple mindset at the outset of your journey is crucial for your success.

Embrace the spirit of continuous improvement.

You have to really believe in it too. When you subscribe to this way of thinking you’re accepting that you yourself are responsible for your financial future. Future success is now in your hands and you control the outcome. 

What actions are you supposed to be hitting consistently? Any and all that relate to sticking to your budget in this instance. The formula is relative to the goal.

If your goal is to increase your income, you’ll need to crush tasks at your job consistently in order to be up for a promotion, for example. When it comes to budgeting this looks more like cutting back on unnecessary spending while you get out of debt, paying extra towards debt, and knowing how much money you have and where it’s allocated to. 

“Without continual growth and progress, such words as ‘improvement’, ‘achievement’, and ‘success’ have no meaning.”

Benjamin Franklin

Overall your mindset should be growth oriented with the understanding that you can always improve. You need to have a positive and optimistic outlook when it comes to your finances, which can be quite hard when you’re in the thick of it all, sometimes with no end in sight. 

“The happiness of your life depends upon the quality of your thoughts.”

Marcus Aurelius

Accept that when it comes to sticking to your budget the best mindset to have is knowing, “if I take consistent actions that keep me aligned with my budget, I will see success.”

Now let’s talk about some ways to deal with the difficult parts of life that come when you’re on this journey.

#4. Focusing Only On What We Can Control

If we are constantly worried about trying to control things that are outside our sphere of control then we are wasting time and mental energy. Having the budget is going to help a lot when it comes to hitting your goals because you have a plan. Within this plan are all things you can control. If it’s not in the budget, ignore and move on (unless it’s a legitimate emergency obviously).

At the end of the day your spending is 100% within your control. 

Remember this as we talk about the various ways to stick to your budget. Overspending means not sticking to your budget so simply understanding this can be powerful for some.

Things will come up that are outside of your control. During these times it pays off having an emergency fund or a line of credit to cover you. But if you’re in debt it can be mentally exhausting having to deal with such expenses such as an unexpected mechanic bill or vet bill. 

When these scenarios arise we must remember that we can’t control our dog getting sick or our car breaking down. While it may set us back financially it will be good to remember not to let it set us back mentally. Readjust our goals and continue on the path forward when these scenarios arise. 

Day to day you will encounter decisions you will have full control over. Therefore get used to taking responsibility for your actions when it comes to your spending. Odds are, no one is making you buy this or that, and the quicker you accept this the better. Once out of debt, the goal is to have built a budget that builds in your lifestyle into it.  Therefore you get a nice lifestyle you enjoy with little to no financial-related stress.

#5. Industry & Frugality

We can all agree when trying to increase your net worth that the ideal scenario is that you reduce spending and increase your income. The best way to accomplish this in my mind is to adopt the mindset of “industry & frugality”. The relationship between industry and frugality is something I got from Benjamin Franklin’s writings.

Industry is a bit of an outdated word in my mind, but it really means (according to Merriam-Webster), “diligence in an employment or pursuit”. To me, that’s good time management and hard work at things that are useful.

Frugality is not spending money on anything unless it does me some good and not wasting things. 

These are basic definitions but also a glimpse into the type of mindset I take when approaching money: don’t waste time or money.

I think everyone can work towards adopting these two character traits and will benefit greatly from doing so. Going forward, make it a goal to try and be more frugal and industrious. 

#6 The Gap – How to Make Smarter Decisions by Taking Your Time

“Between stimulus and response there is a space. In that space is our power to choose our response. In our response lies our growth and our freedom.”

Viktor Frankl

For me I’ve come to call this “the gap”. That’s the space between stimulus and response to me and this is the key to eliminating impulsive behaviors, especially when it comes to money.

Furthermore, Viktor is correct when he goes on to say, “in our response lies our growth and our freedom.”. Abstaining or moderating our spending and increasing our incomes are going to help us grow financially and eventually become financially free – now that’s empowering!

When you’re presented with an option to buy something, what happens inside your brain? Do you immediately click buy or swipe your card? Or do you take a few moments to contemplate the consequences of buying something? Do I have enough in my account? Do I really need this? Why do I want this? How will it improve my life? 

The difference between the first type of person who is impulsive and just clicks or swipes and the second person who is intentional about their purchases is a world of difference financially. For many it could mean further debt and stress versus building real wealth over the long-run.

Becoming aware of the gap is in and of itself a noteworthy experience for many. It’s the first step in shedding your impulsivities as well and another step forward towards your financial goals.

Even people who make really, really good money tend to fall into this trap. Many times it’s more common to see because they DO make such good money, they think they can’t outspend their income. This is frighteningly common, unfortunately. 

#7. “Wind the Clock” or Further Delay Within the Gap

While we just spoke about the gap, let’s talk about further delaying that decision. The longer you can delay your impulse the more time you buy yourself to consider the purchase. Until you develop this skill, this step is crucial.

When thunder dins you may jump. There might not be much of a gap to work on fixing in that scenario. When it comes to deciding on a purchase, that causes a similar instantaneous response. The difference is you can train yourself to widen that gap and buy yourself a little more time.

One time I had a fighter pilot explain to me that during a flight the pilot must make incredibly difficult decisions quickly. However, they can’t make them too quickly or they won’t always be the right decision, and when their life is on the line, this is a pretty big deal.

He said their strategy for making quick, but focused decisions, was to “wind the clock”. What this means is before they make a decision they wind back their wrist watch, thus buying them a few extra seconds before executing an action. One wrong press of a button in a cockpit could be a disaster. By taking those extra few seconds to turn the crown on the side of the watch they’re ensuring the choice they make is optimal and not impulsive.

For us that might look very similar. Taking 10 seconds to decide something is much better than 0 seconds. The bigger the purchase the longer the delay ought to be in my mind. Eventually, like the pilots, you don’t actually have to wind your clock, but instead you develop the habit of thinking things through thoroughly before deciding.

#8. Pros and Cons

Once you’ve begun to widen the gap (between stimulus and response) there’s something you can do further ensure a better decision. Make a quick rapid fire list – pros and cons. Is this useful? Do I need this? Do I already have something similar or exactly like it? Why am I wanting to buy this all of the sudden? What’s good about this decision? What’s bad? Will it take me further from my goal or get me closer to it? If it takes me further away from my goals, is it worth it?

Getting into the habit of asking simple questions like this will save you a lot of money. Building this habit, while not easy, will be very rewarding. And in regards to that last question, “if it takes me further away from my goals, is it worth it?”, sometimes you’ll find the answer to that is actually “yes”. And that is key to balance when approaching your money.

If you’re in a place to do so, write the pros and cons down. Assign values to each pro and con to give them weight. I do this for bigger purchases still to this day. Maybe you need to do it for smaller ones when first starting out. I would make it a goal to learn how to do this on the fly for smaller things and then really dig into the pros and cons and bigger purchases. 

Now that we’ve touched on the gap and things you can do to widen that gap and work within the gap, let’s move on to a few other tactics and strategies you might find useful. 

#9. Sheer Willpower & Understanding Why You’re Doing This 

“What are you saying, we ‘just do it’?” 

Yes. This might come off as an odd recommendation, but for many, harnessing sheer willpower is a legitimate technique. I don’t think it’s used enough, actually. Doing things we have to do but that we don’t want to do is never easy. 

Naturally, some are better at this than others. For those of you who aren’t so good at this, stay tuned, I’ve got some tips below that can help with that. 

I find it easier to do things I don’t always want to do when I fully understand my “why”. Why am I trying to stick to my budget? Because I am in debt or I have a specific financial goal I want to hit. The more of a purpose you have behind your why the easier it will be to muster sheer willpower. 

Before I got on my own journey to becoming debt free I never really had a “why”.

I knew I was paying too much a year in interest to carry credit card debt but knowing that alone wasn’t enough for me to actually do anything about it. It wasn’t until my son came along that I realized I could change his future for the better by being a better role model – in all ways, but specifically financially. Not just to help him be better with money but to afford him better opportunities in life and a better mindset towards it as well. 

That was a strong enough reason for me to set a few goals, make a budget, and actually start sticking to it for once. I had tried budgeting in the past. I used apps, I tracked my spending, but nothing really clicked until I had that reason to change and I made the choice to do so. Finding and understanding this will help fuel the fire to change your circumstances.

Go deeper – why do you want to get out of debt? Maybe it’s stressful or causing problems in your relationships. Why is that? Keep digging. Perhaps it’s preventing you from living the lifestyle you really want to live. That’s probably the most common reason I hear from others. That and the mental stress it causes.

I think everyone has the capacity in them to muster some degree of willpower. It’s important to be able to muster up some willpower to get the ball rolling at the very least, which leads to a disciplined life. Once it’s rolling, let’s take a look at some other strategies to help foster some discipline. 

#10. No Spend Days

The concept is simple enough: don’t spend money for 1 day. 

Start with one day a week. If that’s too easy, add more days until you’re challenged. What counts towards “spending” though? Anything that’s not a necessity. 

A caveat to that would be if you go to the grocery store and you deviate from your list. This is impulsive buying. If you genuinely forgot an item, that is one thing. But if you’re passing by the pre-made sushi section and decide at the last minute to get that $12 spicy tuna roll – that’s a fail for the no spend day. Food as a broad category is a necessity but don’t skirt the rule, be strict on yourself here if you want to find more success. 

Naturally with a site called Just Stop Spending, I am a fan of no spend days. I do enjoy things and experiences but when you’re in debt I find it’s best to focus on getting out as soon as possible and enjoying those things later, once you’re not as stressed out by your financial situation. With that being said, despite being out of debt for many years now, I manage to strike a balance between spending while still hitting my savings goals.

It’s a bit of a catch-22.

By stopping spending so much, you learn to be content with the things you have until a later date. When that later date finally arrives, you tend to spend less than you would’ve, naturally. Thankfully at the end of the day, your happiness remains the same, if not better, than it was when you first started – a huge benefit to all these habits and mindset strategies. 

The power behind this is you’ll quickly begin to see how much you were impulse buying. Whether it’s extra goodies at the grocery store or perhaps shopping online when you’re bored. It’s probably more than you think. It also forces you to plan ahead and consolidate multiple trips into less days.

Another way to take this strategy a little further is to do “No X Day” or a “No X week” or a “No X month”. No driving day on Sundays – walk or bike only. No buying lunch or coffee for a week. Or try no going out to eat this week. No alcohol for a month, etc.

Eventually no spend days may come easy to you so these could be a way to spice up your challenges. I come up with these little personal challenges quite often. It helps me stay accountable to myself and get closer to my goals a little quicker. 

#11. Win Streak

Combining the no spend days with a “win streak” is a powerful way to create consistency. For many this will really help fuel that motivation by seeing that they haven’t splurged in 46 days. Now, I will say, splurging isn’t always bad. But it can easily get out of control and land you in a troublesome scenario which we are here trying to prevent. 

I personally don’t apply my “win streaks” to no spend days specifically anymore but I used to. It worked really well when I was learning these habits for myself in the beginning. Another option is to just count how many days you “win”, whatever that means for you. If that means hitting the items on your task list for the day and sticking to your budget happens to be one of things, then so be it. Regardless, it’s a powerful way for many to feel accountability on their own and to see some serious success.

Once you’ve got 100+ days of doing anything I can guarantee you’ll begin to see some changes. That’s because you’ll be taking consistent action. It’s fun to track and see the change. Some may happen quicker than you think.

For many, myself included, this can become quite addicting. As I’m writing this, I’m on a 1,550 day streak on Duolingo. I can’t stop now! For my situation, I track the wins and losses on a day to day level for my overall daily schedule (not just money/budget). I’ve only had 3 losses this year, meaning I totally failed my list for the entire day. 

When I first started this technique I had losses a lot more frequently. I’ve found this technique has helped me a lot with developing my discipline to continually take action on specific goals. 

#12. Extrapolate Everything Out One Year And Ten Years

This is a bit of an odd technique to some, but for me it helps put things into perspective. It really helps me to assess the potential trade-off or opportunity cost of an item. If I didn’t do something and instead invested or saved it, how much would I have? Then I can make the call if I want that thing daily or monthly or if I value the money more (assuming I save or invest it for Future-Me). 

People love to pick on buying coffee. I couldn’t care less if you decide to buy coffee a few times a week or even daily if it fits your financial goal and is something you value. Let’s extrapolate that out as an example since it is such a common item people harp on. 

Let’s say you get a large black coffee from a local roaster five days a week. $2 for a medium after tip. That choice is going to cost you:

  • $10 a week ($2 * 5 days)
  • $60 a month ($2 * 30 days)
  • $730 a year ($2 * 365 days)
  • $7,300 a decade ($2 * 3,650 days)

That’s the amounts you would spend. If you take the decade example and instead put the $60 a month into the market (assuming 7% rate of return), you’d end up with $9,948. That’s a pretty decent difference for only ten years and for me would be a strong realization. That’s just one spending habit and a small one at that.

I love coffee and buy nice beans and have a decent little espresso machine and buy nice milk and all that. I value that a lot so that’s how I have evolved my tastes. For reference, I used to drink drip Folgers or drink the free coffee at work to save money. I was never a fan of buying coffee on the reg, and I quickly learned how to make a delicious cup at home at a more reasonable cost per cup. I’ve also tried cutting it out before but that is pretty darn tough. Ok enough about coffee.

Choose any small expense and extrapolate it out.

Make sure you value it enough to keep making that choice or begin looking for alternatives. There’s also the option of moderating or abstaining from things. Again, it’s a personal choice. I’m presenting you with options. When I’m staring at multiple thousands in debt that is causing stress, I begin to look at these types of things in more detail.

I like doing this with things just to see the long-term cost of consistently buying something. Sometimes it deters me but a lot of the time it makes me really consider why I am buying this thing or this experience. The key is to focus on value. I recently did this exact exercise when deciding if I wanted to continue my Brazilian Jiu-Jitsu membership. I did it before I signed up but I also did it again to reassess the value. 

If you decide to moderate (spend less) or abstain (spend a lot less) from something after doing this exercise, update your budget to reflect the change and see how much quicker you’ll reach your goal.

#13. Slightly Over Budget Everything On Purpose (But Forget You Did)

Last little tip here but I wanted to mention it before. If you’ve stuck with the article this far, I have high hopes for your goals!

If your electricity bill is $100 a month, make it $115 now. Food cost $200? Make it $230. Gas estimate $60, make it $80. Phone bill $67, make it $70.

This serves two purposes. 

  1. It creates a buffer for unknown expenses (whether your A/C is $15 higher or something else comes up that’s $50 you didn’t expect)
  2. It will typically leave you with an extra $50-100 a month

The reason it leaves you with the extra money at the end of the money is because you have allocated it as “spent” at the beginning of the money in your budget. Say your budget says you have $300 left over at the end of the month. Stick to this but know in the back of your mind that the buffer is actually going to allow you to have say, $400.

I try to forget this is there all month and only use it as a last resort for small expenses that I can’t avoid or that I didn’t budget for correctly. If I happen to end up with an extra $100 at the end of the month then that’s just $100 extra I have towards my goal, whatever that may be.

#14. Withdraw Weekly “Spending Cash”

Last but not least is a tried and true strategy recently employed by a client. They came up with this all on their own and it’s been going really well for them. I have also used this method with a high degree of success in the past.

The premise is on the day you get paid, withdrawing out a very specific amount of cash that you have for spending. This way you know you can only use the cash and once it’s out – it’s out.

Now in theory that sounds good. My problem with this is that it’s so easy to cheat with this method. You’ve got to have a lot of personal accountability to follow this method, in my experience.

With that being said, I wanted you to be aware of it in case you want to give it a shot. Maybe it will work for you and be a total game changer like it was for my client.

How Will It Feel After Sticking To Your Budget For A Year? 

Think of the type of person you’ll have become if you do anything consistently for an entire year. What about ten years? Perhaps a good goal to set is to simply “stick to my budget for 3 months” and see if you can get a win streak going.

While many of these strategies I began adopting early on, many have evolved with me over time. I’ve grown financially and as a person since I’ve been on this journey. It’s been a rewarding experience – and to think it all started with wanting to get out of debt.

What I’ve talked about above are just a few strategies me and my clients have successfully used. You will find you’ll gravitate towards things that make the most sense for you. It might only be one or it might be all and then some.

 At the end of the day your goal is to not be stressed by money and enjoy your life. These strategies will help you work towards both of those goals at the same time.

Here are ways to support, stay in touch, and work together:

I look forward to speaking with you and helping guide you down this life changing path.

In health and in wealth,

Seth