2020 threw us all for a loop (or you know, thirty). One of the big things that happened last year was many of us realized our financial habits were not as sustainable as we thought—we were relying on a thriving economy to make ends meet. The most common new year’s resolution for 2021 in America had to do with making better financial decisions.
Managing your personal budget is something that we all should have been taught as children. Unfortunately, most of us weren’t. The following will explore some of the things you can do in order to stay on top of your finances and help ensure that you and your loved ones will be cared for in the future.
Of course, everyone’s financial situation is a little bit different. If you have specific concerns not related to the things on this list, reach out to someone you trust who has proven experience managing their own money well or a financial advisor.
Have A Mental Moment
Before you begin making any changes or even gathering further information having to do with finances, take a moment to think about money and finances. Get quiet, and present, and maybe have a notebook nearby. Acknowledge thoughts and feelings that arise within you. Study after study has shown that self-limiting beliefs are one of the major hurdles people need to overcome when it comes to any major life change, and finance is no exception. For many of us, these beliefs were programmed in early childhood by accident. Take note of thoughts like:
- It doesn’t matter how much I save up; I’m always going to be broke
- I’m never going to get out of debt
- Only bad people are wealthy
- Only bad people are comfortable
- The second I have a bit of money saved up, the car will break down, or the kids will chip a tooth, or the dog will get sick
Work On These Limiting Beliefs
Once you notice these beliefs, you are free to question them. You might be surprised to realize how many of your beliefs about money are false and harmful. Try to think about money as something that isn’t good or evil—it’s just a tool, like a cup or a chair. If it’s the economic system that has you bitter, try to remind yourself that money isn’t real—it’s something we all agree to believe has to value because it makes our lives easier—it’s actually the biggest example of human cooperation maybe in all of history.
Our minds prefer being right over being happy, which means even if you get your habits right, your subconscious is going to look for reasons to prove itself correct and have you end up miserable or broke once again. Getting your beliefs about money straight could mean the difference between feeling financially secure and capable of caring for your loved ones or working until your bones ache and still struggling to make ends meet.
Have An Observation Month
Before you tackle the actual budgeting, it’s a good idea to have a month of observation. Write down all of your money in and money out in a notebook, in a text message to yourself, or using a budgeting app. This is a no-judgment month. You need to have an honest idea of where you are before you can map out how you’re going to get to where you’re going.
At the end of the month, compile all this saved information into a few pages of your current budget. Group together things that are similar to get an idea of how much you spend on them. Things like eating out, gas for the car, cleaning products, groceries, and all of your bills should get their own category.
Set Your First Goal
When changing lifestyle habits, humans are more successful when they work on one improvement at a time. Pick one thing that would make a big difference in your financial situation—maybe you want to be putting $20 per week away. Maybe you want to cut down your eating out expenses by 30%. Pick one manageable goal and work on that goal for a month. Once the necessary changes become a habit, you can add another goal. One common aim that has proven successful for many people is the development of an emergency fund. Most financial planners suggest a saving up of $1000 that can be used in the event of an emergency to be an excellent first goal. Rinse and repeat.
The above information should be enough to get you started on your budgeting journey. You may notice that emotions run high or childhood memories resurface as you work through the above steps. This is completely normal and nothing to be ashamed of.