“It’s a new year and my financial situation is still the same. Neither my debt nor my savings have changed from last year. According to articles I've read, making a monthly budget helps to curb this problem. I have tried everything from the 50-30-20 rule to other budgeting strategies, but I am still unable to follow one. I don’t what exactly is the reason I can’t continue to keep up with following a budget! Whenever I start following a budget, in less than a month’s span, I eventually give up.
My habit of impulsive spending is too a major concern. I buy things in the heat of the moment, and later the realization that it was necessary strikes on.”
- Confession of an Impulsive spender
Is this situation familiar to you? There's a good chance most of you will find it relatable. It is always in our nature to want to improve our financial situation, but when it comes to implementing it, we somehow fall short!
Consistency is something that often gets overlooked, whether on purpose or unintentionally. Why does it happen? What makes following a simple budget so tricky? What prevents you from following a budget?
YOUR WAY IS BLOCKED BY THESE STUMBLING BLOCKS!
HABIT is what hinders your path!
The idea of having a habit is far different than that to follow it. Your habits are formed by the small decisions you make and the actions you perform every day. The habits that a person develops today have a significant impact on their lives. For instance, are you happy or unhappy? Are you financially fit or not? How successful or unsuccessful are you?
It is your habits that determine how these scenarios play out in your life. In the end, you are the person you are, the beliefs you hold, and the character you project based on the actions you take each day.
According to James Clear, author of Atomic Habits, "once you learn to transform your habits, you can transform your life".
PROCRASTINATION, or the ‘thief-of-time’.
Recent psychological studies have shown that the level of procrastination among people has significantly increased. For instance, when it comes to following a budget, you might have seen yourself in a situation where you are delaying the task to create a budget. You keep on postponing the task for the next day or maybe next month.
Thus, a stumbling block between you and your budget!
The question is why do you do it?
In behavioral psychology, something called 'Time-consistency' has been discovered. Humans have a tendency to prefer immediate rewards over those in the future. There are two separate selves: the Future Self and the Present Self!
You might have seen yourself making plans for the future like getting a big house or saving money, in this case. Also, called the future self.
But only envisioning such things will not get you the results, the value of gaining long-term benefits by taking action now. Also, called the present self.
Your brain is now focused on the present self since it prefers instant gratification over long-term rewards. Hence, your future self would like to save money, whereas your present self would like to take advantage of the 20% sale!
Additionally, the young generation understands the importance of saving for retirement and the future. However, since the reward is long-term, not short-term, your attention might wander! It is likely that your present self will spend the money elsewhere because you will feel satisfied with it!
This is what stops you from following things. Now the next step is how can you work on this. How can you overcome these obstacles?
How to take action now to stop these stumbling blocks?
Get started with a very small habit
Most people set up goals that are difficult to achieve on the first go. Thus, after a continuation of 1-2 days, they end up not being consistent. Many A lot of people set up goals that are hard to achieve on their first attempt. As a result, they cease to be consistent after 1-2 days. Clearly, this is a situation that many people can relate to, but why is it this way?
As a result, we end up losing motivation because we set targets that are difficult to achieve. The motivation wave rises and falls, as mentioned in Atomic Habits. Making difficult targets is the reason for this.
Set a small target or number when you plan to save or set a budget. Initially, start creating a budget where you could save at least 10%-20% of your income, and try for 2-3 months. Focus on achieving this short-term goal first & once you find success in this, then move forward. If somehow between these months you lose your motivation wave, start again with this. It is important that you save 10-20% for 3 months at least.
Small changes can make a huge difference
“Success is a few simple disciplines, practiced every day; while failure is simply a few errors in judgment, repeated every day.” —Jim Rohn
You can slowly increase your savings in line with your budget without hurting your motivational wave by doing so.
It is better to increase your habit in small steps rather than big steps in order to maintain consistency! Every month, add 1%!
Break your habits into smaller pieces as you move forward
The only thing standing in your way to following a budget is your HABITS! Now moving forward, as you have started adding 1% every month, you will find yourself increasing quickly in a span of 2-3 months. Each habit should be reasonable so that you can maintain momentum and make the behavior as simple as possible.
It is very crucial to breaking your habits into small chunks, this way it gets easier. So now, you can spread your monthly savings into investments.
SIP is a great tool that works multi-dimensional. One it, gets into a financial discipline of investing monthly, secondly, with SIP investments, you could actually work towards
achieving your long-term financial goals. You could buy your own house or car, plan for your child’s higher education or marriage, or your retirement plan!
Psychology states that the easy you go, the fastest you get into the habit of something! The harder you go, the tougher it becomes to be consistent!
Engage in commitment devices
People with procrastination are often helped by this tool. Commitment devices help you plan your future actions ahead of time.
When it comes to creating a budget, it is always said to have an emergency fund ready. As stated above, SIPs can help you in this situation too! Creating automatic debits to transfer your funds will help you save money for emergency funds. You may at some point in time lose motivation but automatic debits will keep you on track!
Once motivation wanes and the busyness of life kicks back in, consistency fades away. Visual cues can help you navigate this path. Keep track of your success or failure with calendars or excels, whatever suits you best!
Your previous accomplishments can motivate you to take the next step constructively.
Bottom Line: It's not a good idea to expect failure, but it's a good idea to plan for it. If you want to prevent your habit from occurring, take some time to think about what you will need to do. Do you have any stumbling blocks? How often do you get pulled off course by daily emergencies? What can you do to bounce back quickly from them and get back on track?
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