Did you know the US government has a list of the most popular New Year’s resolutions? No, this is not some form of “Big Brother watching” way of keeping track of the goals we set for ourselves but a list of most popular resolutions with links to useful web resources to help achieve them.
To no one’s surprise, a big percentage of the resolutions on the list are related to two coveted outcomes: to be physically and financially healthy.
Most everyone has been taught that one of the main methods to achieve financial health is to create a budget and stick to it. Same goes for physical health – get on a diet and stick to it.
So what do diets and budgets have in common? They don’t work! And let’s face it; they are not any fun either.
They both focus on what you cannot do and cannot have and do not account for surprises. Psychologically, both diets and budgets are ineffective and even potentially damaging to our wellbeing because the sense of restriction and deprivation create feelings of resentment which only destine the plan for failure. I think most of us know all too well the feeling of being motivated to start a diet just to fail a few days or weeks later.
So my suggestion, although it may seem counterintuitive, is to abandon the budget and the diet altogether. By focusing on the big picture and what you can have you will be more likely to be successful in changing your mentality and be better positioned for success.
It is really quite simple: in case of financial health – spend less than you bring in; and in the case of physical health – the other way around – expand more than you take in. We all fully understand the theory but once when we try to live by those principles we realize that it may be much easier said than done.
Change the way you see saving and spending. Similar to healthy eating, you would be much more successful if you focus on the nutrition you get from your food rather than obsess with counting calories. The recipe is quite simple – eat whole, “clean” foods, cook more at home, eat less “empty” calories and move more. When it comes to your financial health, the principles are similar. Instead of feeling restricted with an unrealistic budget, develop a spending plan based on trends and be prepared and aware of “surprises” that will come along the way. Think about the purchases you make, the state of mind you are in when you make them. Are you an impulsive buyer? Do you have to have all the latest gadgets? A spending plan and a careful analysis of your historical spending will help you answer all those questions truthfully to yourself.
Budgeting and dieting share another similarity. Regardless of how devoted you are to your budget or your diet, life just happens. You will have that piece of scrumptious chocolate cake at the office birthday celebration party just when you have started your “No Sugar” diet. Or you will have to spend hundreds or even thousands on inevitable car repairs. This often creates the feeling of failure and makes us feel like we are not staying on target and not meeting our goals. That’s why an overly detailed budget will set you up for failure when a spending plan will outline the major categories in your spending: monthly bills, living expenses, saving for retirement, vacation, emergency fund etc.
Reexamine your priorities and consider why are you following the diet or budget anyways. Instead of being forced to focus on the restrictions that come with dieting and budgeting, focus on the long term goals and acknowledge progress along the way.
And last but not least, take advantage of all the tools available. There are so many options, from do-it-yourself programs like Mint.com , through complementary advice from Mymoneyplan.net to customized, comprehensive spending plan you can work on with your advisor, like the ones from Your Family Bank. Whichever one you choose, focus on your goal of financial freedom. The budget is just an imperfect tool to get there and not the goal itself.