Latest posts by R.J. Weiss, CFP®
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It’s 6:00 at night on a Thursday. You arrive home after a typical exhausting day at work + tiring commute home.
Your weekend grocery shopping didn’t make it until Thursday. So, you decide to order out. It’s only a few extra bucks then preparing a meal yourself, right?
It’s now 8:30 in the evening. You find yourself taking part in some online retail therapy. After what you went through today — it feels right to treat yourself.
Minutes later a friend texts if you want to go out to dinner this weekend. Even though money is tight, you say yes.
A few weeks later you get an email from your credit card company. Your payment is due. You login to your bank account and notice there’s not enough. After some quick number crunching, you decide what you can afford — promising yourself next month will be better.
Does a situation like this sound familiar?
Maybe dining out and clothes are not your way of blowing your budget. Maybe you tend to stretch yourself on big purchases. Maybe you can’t give up on a good deal.
Sticking to a budget is hard work. When you read the research behind self-control and willpower, it makes a lot of sense too. The standard approach to budgeting has many failing from the start. A few survive more than a month. An even smaller few develop good habits for the rest of their lives.
What makes the difference between those who are back to their old ways vs. those who develop and maintain a budget?
The latest science has given us some excellent answers.
How to Stop Impulse Buying for Good
After taking a self-inventory at the end of 2017, I decided the focus for the year for me would be self-control.
My lack of self-control isn’t impulsive spending. Rather, it’s the ability to focus.
To sum up a main point of Cal Newport’s excellent book Deep Work: the ability to focus is becoming rare, making it a highly valuable skill.
I’ve started 2018 on a deep dive into self-control — reading any quality material I can get my hands on.
While only a few weeks in — I’ve come across very good research to improve your self-control. While I’m applying this to my own goal — the same principles can be used to stop impulse buying and stick to a budget.
If you’ve tried but failed to get you budget under control — give these tips a try. As I’m quickly finding out, they work.
Budgeting Hacks For People Who Have Failed at Budgeting
Make Your Finances Your # 1 Priority!
When we set goals we tend to make them across different areas of our lives.
But guess which person is more likely to succeed with their goals:
- Person A – Is trying to lose 10 lbs AND increase their savings rate to 10%
- Person B – Who is 100% focusing on increasing their savings rate to 10%
The research has shown Person B is more likely to succeed.
We have a limited amount of willpower that becomes depleted when we use it. Too, we use the same stock of willpower for all areas of our lives.
Say you’re trying to lose weight and save more money. You did a great job of resisting dessert today at work. However, that night you can’t resist a deal that was too good to pass up.
What you must remember is to focus only on one change at a time. You don’t have the willpower stored up to do two new things at once.
What helps is to think long-term. In one year, say you want to be fit and have your finances under control.
Instead of setting New Year’s Resolutions to do both — do one at a time.
HOW TO SET FINANCIAL GOALS
A step-by-step process for setting financial goals that connect the dots between your money and your happiness. Simply opt-in below to have it sent straight to your inbox!
Related Reading from The Ways to Wealth
- 12 Money Hacks That Will Add $5K To Your Bank Account
- The One Surprising Money Habit Millionaires Have In Common
- How To Save $1,000 In A Month: A 30-Day Money Challenge
Don’t Set Goals, Do This Instead
With only so much willpower, it’s important to pick goals carefully. But if we’re trying to control our spending — what exactly should our goal be?
We’ve all learned goals should me SMART (specific, measurable, achievable, results-focused, and time- bound).
So, a good financial goal might be something like: “I’ll cut spending by 10% this month.”
That fits the SMART goal guidelines.
But again, it’s important to think long-term. Say, you’re able to cut spending by 10% per month.
But after making about a dozen or so changes — you’ve found yourself out of willpower.
Just as with most diets, what happens next? You’re back to your normal habits.
The ironic thing about people who have great self-control is that they don’t use willpower to resist whatever needs resisting. Instead, these self-control “masters” have habits.
The person who works out every morning doesn’t need to give themselves a pep talk every single day. Instead, they get up and go workout. Sometimes it might be harder than others but the habit makes it much easier.
Goals are great for setting long-term visions. But it’s changing habits that leads to lasting success.
If you want to cut spending by 10% — that’s great. However, the chances of you succeeding long-term will be much better focusing on one habit.
So, pick one category of your budget (the one where you tend to overspend the most) and focus on cutting costs there.
Don’t Spend After Making A Lot Of Decisions
Steve Jobs famously wore a black turtleneck everyday. For him it was one less decision he had to make each day.
Before it became a term in behavior science — Steve Jobs understood the concept behind decision fatigue.
It’s now well researched that the more decisions we have to make in a day, the lesser quality those decisions get.
Have you ever overspent money on a lazy Sunday morning after 9 hours of peaceful sleep and a healthy breakfast? Or, are you more likely to overspend on a Thursday night, bored, after a long-week at work?
It’s the stressful, tired situations that we tend to slip.
So, what can you do?
A few tips to help:
- Make important financial decisions early in the day after a good night’s rest
- Avoid making decisions when you’re stressed or overtired
- Make good decisions when you’re rested, that eliminate future decisions
The last tip is something to think hard about.
From the book, The One Thing, comes the powerful question:
What’s the one thing you can do, such that by doing it, everything else will be easier or unnecessary?
It’s a question worth brainstorming upon.
A few ideas to get you started:
- Increase your contribution to your 401(k), then budget what’s leftover
- Setup automatic withdrawals to an investment or emergency fund
- Freeze your credit, so it makes it harder for you to open new lines of credit
How Often Should You Track Your Spending?
If your goal is to lose weight, how often should you weigh yourself?
Daily? Weekly? Monthly?
The research shows those who weigh themselves daily are more likely to accomplish their weight goal.
Providing yourself constant feedback has also shown to improve your finances. From the excellent book Willpower by Roy Baumeister, which looked at how individuals habits changed after tracking their finances using Mint.
the data—culled from two billion transactions of three billion anonymous users—showed some clear benefits of monitoring.
For the great majority (80 percent) of people, the upward trajectory of their spending was tempered after they joined Mint and began monitoring their transactions.
And most people’s spending was further tempered if they used the information to set up budgets and goals on Mint. The biggest effects were observed in people’s spending on groceries, restaurants, and credit card finance charges—some very sensible categories
If you’re not already, start tracking your finances.
But don’t just track — do what the most successful users did and set up budgets and goals.
An email reminder or alert on your phone that you’re over budget can be a powerful.
Personal Capital Quick Summary
- Free analytics tools to show you where you stand relative to your goals
- Named best financial app by MacWorld
- Sign up in seconds
Never Say Never
As Mark Twain put it in The Adventures of Tom Sawyer:
“To promise not to do a thing is the surest way in the world to make a body want to go and do that very thing.”
Giving up something 100% is very hard. More so, it’s not necessary.
For example, let’s say there’s some clothes you’ve been meaning to buy. Instead of jumping right online and buying them, tell yourself “Not now but later.”
From the book Willpower:
…telling yourself I can have this later operates in the mind a bit like having it now. It satisfies the craving to some degree—and can be even more effective at suppressing the appetite than actually eating the treat.
So, go ahead and build up that Amazon wish list. Create a To Buy folder in a notebook. Whenever you feel the urge to buy something, add it to that wishlist.
Chances are you’ll forget about that “immediate need” in a month anyways.
Set Up A Discretionary Spending Account
Many of us know we need to start living on a budget. Yet, we fail to start. Often times this procrastination is due to feeling like we have to give up something we enjoy.
If you’re going to succeed, you’ll have to change your behavior. But starting a budget doesn’t mean you have to give up whatever it is you enjoy.
In his book, Dollars and Sense, Dan Ariely Professor of Psychology and Behavioral Economics at Duke, recommends setting up a discretionary spending account:
When people tell us they have a hard time controlling their spending, we acknowledge that they could budget for everything, but we also tell them it’s likely to be so annoying that they’ll just give up.
Instead, we suggest they decide how much they want to spend on a broad category of “discretionary items”; the things that they can live without, like special brew coffee, fancy shoes, or a night of drinking. Take that amount, on a weekly basis, and put it on a prepaid debit card.
Now they have this category of discretionary spending with a new budget each Monday. The balance on the card will show how it’s being used and the opportunity costs within this general category will be more apparent and more immediate.
How to Stop Spending Impulsively for Good
To stop impulse buying and stick to a budget requires change. But there’s a right way to go about the problem and a wrong way.
If you’ve failed in the past — there’s no reason you can succeed in the future with a better approach.
Related Reading from The Ways to Wealth
- Dave Ramsey Recommended Household Budget Percentages
- 7 Brilliant but Easy Money Moves You Should Make Before Day’s End
- The Ultimate Guide To The Cash Envelope System