6 Money Hacks to Lighten Your Budget
Winter. The season when hibernating becomes routine, exercise lessens and somehow, extra weight tips the scales in the wrong direction. The same is true when it comes to your spending. We set positive goals to improve our personal financial lives in shape, but somehow it all gets lost in the cold. The daunting task of changing our spending habits become a severe incoming snowstorm we avoid at all costs.
Living on the financial treadmill can lead to complacency and waste—it can even bloat a budget to an unhealthy level if we don’t push ourselves towards success. But, if you truly desire your financial goals, all is not lost.
Here’s where to start: Just like weight-loss, set a goal. First, understand where your money goes each month and categorize everything into a list of: 1) Fixed costs (debt, rent, etc.), 2) Semi-discretionary (food, clothing), and 3) Fully discretionary (vacations, entertainment, etc.). Examine your fully discretionary category and pick a number you wish to save, invest, or reduce debt. Let’s say, 10%.
Following these 6 money hacks can firm up your wallet and put you on track to reach your financial goals.
- Set up money buckets (separate accounts) for specific purposes; one bucket for your fixed costs, another for your savings and another for those discretionary (semi and completely) spending. This will help you align your available resources and understand where your hard-earned cash goes. It’s too easy to keep it in one place and watch it dwindle without really hitting your goals head on.
- Use automatic transfers to investment accounts to capture your savings goals beyond your emergency fund needs. If you pay yourself first instead of last, your chances of success are greatly enhanced. Put your success on autopilot and calendar a review to increase the amounts every quarter.
- Increase your 401(k) percentage. If you haven’t fully funded your 401(k), begin increasing the percentage by 1% every two months until you reach maximum. You will be shocked and pleasantly surprised to see how little it impacts your net payroll each pay period. This will grow your retirement plan quickly.
- Stop unnecessary spending. Of your discretionary costs, select the expenditures you value the least and eliminate them from your spending. For example, publication subscriptions you just don’t get to, gym memberships you don’t use, cable channels you don’t watch, those extra costs for delivery meals when you’re feeling lazy.
- Compile these savings and push them towards your debt. If you have debt that is squeezing your budget, push those savings directly to the debt with every paycheck, even if it’s a small amount, Online banking makes it simple. The more frequently you pay, the less interest you pay. Of course, using balance transfers to lower interest rates will help when available.
- Examine your semi-controllable expenses. To dig deeper into slimming your spending, you might need to look at your semi-controllable expenses. For example, understand the deductibles on your insurance policies, and reconsider where you buy consumer goods, including food, gasoline, non-perishable goods, clothes, etc. A good hard look at savings in every category is doable if you have the will and mindset to create positive change.
Don’t wait for the winter thaw to begin thinking of self-improvement. Plan ahead, take control, make small decisive steps to increase your financial awareness and allocate resources to places where it will benefit your financial growth.
If you get stuck on old habits, change will never happen and you’ll find your budget sagging. Make change, create habits that support your financial health, and watch as your happiness increases. Start now. You got this!!
Why Lasting Change Is Hard
Before we had any children, my wife and I lived in the heart of Dallas. One day, on our way back to our house, we were driving down Skillman Avenue when we were caught in a sudden torrential downpour.
The rain was coming down incredibly hard, which wouldn’t have been a problem if the storm drains were equipped to handle that much water. Instead, the road itself filled with water faster than we could have anticipated. Quickly, the water rose up the side of our car. Trying not to panic, we realized that we could not continue and would need to turn around and get to higher ground.
Water rising up the side of your car door is the kind of roadblock you might not expect to encounter, but when you do, it’s formidable. We couldn’t drive through it or even around it. We had to deal with it quickly or face serious consequences.
When we’re trying to implement change in our own lives, it’s important to identify and plan for common roadblocks to lasting change.
The first and, in my opinion, most important roadblock to lasting change is not addressing the real issue.
Let’s say you wake up in the middle of the night with a sore throat. You’re annoyed by feeling sick but your throat really hurts, so you get up and spray a little Chloraseptic in your mouth and drift off to sleep. When you wake up the next day, you still have a sore throat, so you pop in a cough drop and go about your day.
The change you’re making – using a numbing agent – might work if you’ve only got a cold, but if it’s strep throat, you’re not addressing the real problem. Only an antibiotic will cure what ails you, even if Chloraseptic will keep the pain at bay for a while.
Just like how more information is needed to diagnose your sore throat than one feeling, problems you encounter in your life or business require diagnostics, too. Figuring out the real problem – not just your most apparent needs – requires some introspection and a little bit of time.
Here are eight questions to ask when you need to discover the root cause, courtesy of MindTools.com:
- What do you see happening?
- What are the specific symptoms?
- What proof do you have that the problem exists?
- How long has the problem existed?
- What is the impact of the problem?
- What sequence of events leads to the problem?
- What conditions allow the problem to occur?
- What other problems surround the occurrence of the central problem?
Once you have your answers to these key questions, you can’t stop there. Your vantage point is skewed from your own perspective. You’re going to want to ask someone else to evaluate the problem at hand with the same questions and then compare your answers.
If you and all of the partners at your firm have similar answers, you’ll know you’re on the right track. If you wind up with wildly different ideas, I suggest seeking the advice of someone outside your organization. Fresh eyes can make all the difference in understanding a problem.
I often talk about being ‘too close’ to understand. You’ve probably heard the illustration about a group of people standing by an elephant with blindfolds on, trying to describe what they’re experiencing. Depending on what part of the elephant you’re next to, you’re going to have different observations.
But someone outside of that elephant’s cage can clearly identify the elephant.
The first key to making a lasting change is to make sure you’ve addressed the real problem and are looking for authentic change.
Next time, we’ll address the second major roadblock to creating last change.
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