Have you been frustrated by your inability to stay on a budget?
Have you tried your darndest to stay on a budget – maybe even with the use of the cash envelope system, or couponing – with little or no success?
Maybe you’re like me, and you’re a spender who just finds it difficult to stick with any plan for more than a couple of weeks, especially once life gets busy…
… or when your kids are begging to eat out for supper.
… or when you get a $10 off $25 coupon text from JCPenney.
Well, don’t despair! I have good news for you: I have a solution! And don’t worry – it’s actually really easy.
Why is it so hard to stay on a budget?
A budget is a system of allocating your money into pre-assigned categories. “Telling every dollar where to go,” as Rachel Cruze says.
But in real life, it’s a little messier than that. Life throws so much at us each day, and it seems like each event costs us money.
A note in your kid’s backpack calls for a field trip fee.
A routine cleaning at the dentist reveals a cavity that must be filled.
A nail in your tire requires a patch, or worse, a new tire.
Don’t get me wrong, I am a big believer in budgets. It’s always a good idea to have a plan – something to shoot for.
Not just with money, but with time management, fitness, weight loss, and so many areas of our lives.
It all comes down to self-control.
And try that we may, we are human, and we will make mistakes.
It’s easy to stay on a budget when life is going your way.
But when we are rushed, stressed, depressed, or the pressure’s on, we often lose our heads and succumb to taking the easy way out.
What you need is an incentive!
I finally figured out in my mid-thirties that I am much more likely to get through drudgery when there’s a reward at the end. “What’s in it for me?” I find myself asking a lot.
Sorry, but I’m not super-pumped to clean my house or eat healthy just because I should. That’s not enough for me to want to (and hang on through the tough times).
Staying on a budget for the sake of financial responsibility is not enough of a reward for me. And my guess is, it’s not enough for you either.
If it was, you wouldn’t be reading this article right now!
The key is to find the right reward that will motivate you to do what you need to do (and to do it well).
What will motivate you?
You may want to go through a trial-and-error process to find out if you are motivated more by a verbal “Good job!” from your spouse, some quality time with your bestie, or something more tangible like money or a special treat.
I am gonna go out on a limb here and say that you probably love all of those things, but are the most motivated by money or things that cost money.
Money is why you need a budget in the first place!
You want to stay on a budget so that you’ll have more money (eventually, after you pay off all your debt) to spend on what you want to spend it on.
I’m going to share with you my simple plan of rewarding your budget efforts with money.
Step 1: Set your goal
Your goal is obviously to stay on your budget, but you first need to know what your budget is.
- Write down all of your income.
- Subtract all of your set-in-stone expenses (loan payments, insurance, utilities, and other bills).
- The remaining amount should be what we are going to call ‘your budget.’
If you are trying to pay off debt or save for retirement, ‘your budget’ may even be lower than this amount. For example, you may have $1000 left after bills, but you’re trying to pay $250 extra towards debt. So ‘your budget’ will be $750.
You’ll also need to know how long this amount should last you.
Be realistic. You may want to start with a one-week budget goal for a while and later graduate to two weeks or even a month (in coordination with your paychecks).
But don’t feel guilty if you want to stay at one or two weeks forever. Do what works!
The important thing is to find success so that you can eventually reach your financial goals.
For the sake of transparency, after set-in-stone expenses and extra payments toward debt, I have a budget of $550 to last me two weeks.
Step 2: Define your expenses
Start with the basics: groceries, gas, household supplies, eating out, entertainment, and miscellaneous.
You may also need this amount to cover haircuts, medical expenses & prescriptions, gifts, car repairs, or other items if you have not set aside money for these purposes.
What if you need to buy a new cell phone or workout gear (something that only benefits you)?
It pays to answer some of those questions before you start, but there’s no way you can anticipate every scenario that will arise.
(I have some FAQ’s down at the bottom of this post where I share my personal answers to some of these questions.)
This year (my second year following this plan), I actually wrote down all of my expected expenses throughout the year so I would have the most accurate plan possible!
Of course, I still can’t account for everything that will come up. But by being as prepared as I can be, I am likely to eliminate most of the guesswork. (Plus, it makes me feel better!)
Step 3: Pick your reward
What will motivate you? (And a related question is: How much can you afford?)
You don’t want your reward money to put an undue burden on your finances.
But think about this: if spending $20 on yourself keeps you from going $200 over your budget, isn’t it worth it? Won’t you still be in a better position financially?
Remember, this is money just for you that you get to spend as you please – without having to answer to anyone for it. You can spend it on fashion accessories, Starbucks drinks, or waste it all in a gumball machine for all anyone cares! Use it for those things you’re giving up buying in order to stay on budget.
Start small and increase as needed to ensure it motivates you!
Step 4: Keep track of your budget
Whether you use cash or a debit card, you will need to write down your expenditures and, just as importantly, your spoken-for expenses.
Spoken-for expenses are those things you know you’ll have to pay for but haven’t yet spent.
For example, you know you’ll have to put $40 gas in your vehicle this weekend. You haven’t spent it yet, but you will, and you need to account for it now so you don’t accidentally spend it on something else, and then be left without enough money for gas.
The idea is that when you look at your balance, you need to know exactly how much you have to play with. If it says $300, but you have $250 worth of spoken-for expenses, then you actually only have $50 left.
You may keep track of your budget in any of the following ways:
- Pen and paper
- An app on your phone
- A spreadsheet like Google Sheets (I explain how to do this here.)
I used pen and paper for my first year on this plan, but now I use Google Sheets. I keep all my files on my Google Drive so that I can access and update them anywhere I have internet service (home, work, cell phone).
Here’s what my Sheet looks like:
As you can see, my balance starts at $550, and each of my actual expenses is listed in black. Then below that, I have several spoken-for expenses in red. The right-hand column contains a running total.
If you look at the very bottom, you’ll see I have just over $20 to play with during this budget cycle. That information is very valuable. You may also notice that I factor in a $15 cushion for “unexpected” expenses each budget cycle. This is for all of those things I may have forgotten.
Many of my spoken-for expenses are flexible. If I need to squeeze more money out of my budget for an emergency expense, I have some things I can cut down on or cut out completely.
Related article: How to Budget with Google Sheets
Step 5: Stay honest
To get the most benefit out of a goal-and-reward system, you need to be honest about your performance.
It will not benefit you in the long run if you neglect to write down expenses just so you can come in on-budget.
It won’t make you feel good, and it won’t help your financial situation.
The best help is to find an accountability partner. It might be your spouse, a relative, or a trusted friend.
This person needs to have access to your budget numbers. Many apps (and Google Sheets) have the ability to be shared with a partner.
Or if you keep your budget on paper, leave it on the kitchen counter or take a picture and text it to your accountability partner every couple of days.
Explain to your accountability partner what you’re doing and that you are trying to develop good spending habits long-term. Ask them to check in on you now and again.
If you go over-budget, you may be embarrassed about it. But trust me, coming clean to someone will give you a sense of relief, and give you the ability to get over your guilt, start clean, and move forward with renewed motivation. This person cares about you, and they are going to support you.
Let me give you a pat on the back for even being here, searching for a new way that will work to stay on a budget!
Although you may have failed in the past (maybe even many, many times like I did), you are still moving forward! And each day is a new day!
I’ll be honest with you. Things will probably not go smoothly on your first pay cycle with this plan (or maybe even the first few pay cycles).
Don’t lose heart! You’re just learning the ropes – and learning what not to do!
Just remember that whatever bit of success you have is a ton better than the failures you were having. Keep at it and you will get better!
I suggest trying these steps for a minimum of three months before you decide to change anything (like your budget amount or reward amount).
But if you feel right away that something is not working, it is better to be flexible than to throw in the towel altogether.
I believe you can do it!
And I’ll be here with you every step of the way!
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Below are some FAQ’s that may help. If you have more questions (or suggestions), please comment below or email me directly. (I’m just a regular person and I’m here to help, so it’s totally okay!)
Frequently Asked Questions
If I go over on my budget, should I start with my normal amount the next budget cycle?
No. If you only have $500 to spend, then you only have $500 to spend. If you spend $600, then you need to make up for it the next cycle by starting with $400 and squeezing a bit. Otherwise, there is really no difference in consequences between going over-budget by $10 or $300.
What do I do if I have extra money at the end of a budget cycle?
This is up to you, but it basically comes down to the following three choices:
- Keep it for yourself as an extra bonus
- Roll it over to the next budget cycle so you have more money to work with next time (this is what I do)
- Set it aside in savings for a larger purchase or emergency fund (I did this for a while to save up for a new barbecue grill)
What if I have an unexpected expense that I can’t fit in my budget?
If it is a true necessity, then you should choose one of the following options:
- If you have any flexible payments (such as extra payments to debt or savings), you could put that extra amount on hold for a month to cover your emergency
- You could attempt to earn some extra money. Pick up some overtime at work, sell some items around the house, etc.
- And the last option would be to use savings – do not go into debt!
Do you have any questions about how to implement this method? Have you tried this before? Is there anything you would recommend adding? Post a comment below! (Or email me.)