Budgets and diets have a lot in common. You know you should do it. You don’t want to do it. It’s easier to start one than it is to stick with one, but they both pay off with great results if you can manage to follow through. Most people are forever trying to conquer bad spending habits and the inability to stick with their budget, but what you may not know is that by using a little psychological trickery, you’ll be better able to reach your financial goals. After all, the way we manage our money today will affect how we live tomorrow. Here are five tips from psychology that will help you achieve your financial goals.
1. Start with a clear, positive goal in mind: Mindset is everything when you’re trying to get rid of bad habits and instill positive ones. When you think of a budget in terms of depriving yourself, it’s a lot harder to stick to your resolutions. Instead of thinking about how much you have to give up, focus instead on working toward a goal that will benefit you. Some of the positive goals you might aim at include being debt-free within a year or saving a specific amount of money each month toward your vacation, new home down payment or retirement plan.
2. Write everything down: Writing things down helps you to be more accountable for your choices. Weight loss specialists tell you to write down every mouthful of food that you eat because it makes you think about it, and shows you clearly exactly where your strengths and weaknesses lie. The same applies to your spending habits. Before you start working on your budget, spend a week writing down every penny you spend – even the pack of gum you buy on your way to work each morning. Putting it in writing will help you identify exactly where your money is going, and the practice of writing down your spending will help keep you focused on your goal.
3. Use visual aids to chart your progress toward your financial goals: Have you ever seen one of those thermometer charts in front of a church – the ones marked off in $1,000 increments that get colored in as the congregation reaches each benchmark? Progress charts are a powerful psychological motivator because they help you actually see your progress. Get out your magic markers and create a chart, then fill it in once a week to watch your money grow – or your debts shrink.
4. Automate your savings with help from your bank: It’s a lot easier to make a decision once than to have to keep making it week after week after week. If part of your budgeting goal is to save a specific amount out of each paycheck, let your bank help you stick to it. Accept direct deposit if your employer offers it – that relieves you of the task of getting your money out of your pocket and into your bank account. Set up a weekly transfer from your checking account – which should only have enough cash for your budgeted expenses – to your savings account or retirement fund. That way, you won’t have to make the decision to save each week – you made it once, and it’s done.
5. Set intermediate goals and reward yourself for reaching them: Striving toward a huge goal can be overwhelming — it’s far too easy to get discouraged and give up. Instead, break your goal down into workable steps and then acknowledge your success when you reach each step. Build rewards into your budget so you have something to look forward to – schedule dinner at your favorite restaurant when you hit milestone savings marks, for example.
If you’ve never tried to live on a budget before, or if you’ve tried and failed, applying some positive psychology tricks can make the difference between one more abandoned budget plan and a growing bank account.