We’ve all been there, built a kick-ass budget but you’re unable to stick to it. Today we’ll be having a look at how to stick to your budget, with a battle-tested technique I use to put my budget in action and manage my money.
So you know why having a budget is important and you’ve absolutely nailed your budget creation. You’ve analysed the f*%@ out of your expenses and know exactly what you should be spending each month.
If you do spend to your budget, then you know you’ll be onto a winner. Paying down that debt? Easy peasy. Building up a house deposit? Creating a war-time emergency fund? No dramas mate.
Although d’oh, you’ve just never been able to stick to the budget.
Why the hell is that?
Trust me, I’ve been round the block on this one.
Those “really helpful” tips and tricks articles don’t help either so don’t worry, I’m not about to unload some generic tips about how you just need to up your willpower game and invigorate your weak soul.
This strategy worked for me (and continues to work). Of course like any other human I slip up every now and then and fail to stick to my budget, but because I’ve engineered a fairly healthy personal profit (/savings rate) of >40%, I have a healthy buffer to fall back onto if I do overspend in one month.
Why is it so difficult to stick to a budget?
Even though I recommend everyone should have a budget of some description, it is likely that you’ve found yourself in a position of creating a budget because the lifestyle you default to doesn’t lend itself to a healthy financial situation.
Left unchecked, you may be spending at or above your income level, leaving no personal profit left over to save and invest, or worse, consumer debt is starting to build up.
So against the backdrop of this, why on earth can’t I stick to my damn budget?
Make it easier.
If it requires too much effort at the critical spending decisions, chances are you won’t stick with it.
The major key…
I’m sure DJ Khaled agrees with me when I say that the major key to sticking to a budget is to make it easy. You don’t want to have to be thinking about and analysing every spending decision to see how it fits into your budget.
Split it into little virtual envelopes
The technique I use is similar to piggybanking or the envelope method, where you divide your money into separate pots intended for separate uses.
The way I set mine up means that I get instant feedback on whether I have money for “fun”, whilst ensuring that all of my essentials are paid for.
As part of your budget, you would have identified different categories of spend such as;
Those are the categories that I use for mine.
After each payday (I get paid once a month so this is a one-time activity for me), I simply send the money into separate accounts so that I can forget about them, with my personal profit being sent out to my savings/investment accounts.
- Housing / Bills -> goes into a separate housing/bills current account where I have direct debits and standing orders set up
- Holiday -> goes into a savings account specifically for holiday cashooola $$$$
- Travel / Groceries / Entertainment -> I have a separate current account where I transfer this into. This is the secret sauce.
I find that I have no problem sticking to my housing/bills budget, these are fairly rigid bills that don’t vary a tonne. The problem I have, and I’m willing to bet you’re similar, is with my discretionary spending.
Its hard to deploy the wonderful willpower when you’re wanting to go out and socialise (especially if it involves a jar or two).
However, I find that this technique works really well as all I need to do is check my fun money account (the account with the travel/groceries/entertainment money in). If there is cash in there then brilliant, I’m all in.
If not, I know I have to rein it in and have a quiet one.
This is very similar to the envelope technique, where you put cash literally into separate envelopes, all earmarked for different purposes.
However, because we don’t live in the 15th century, we’re not putting cash into envelopes (although I did try this for a bit and it was remarkably effective – I think because of the visual feedback of seeing your cash physically depleting – so if this digital version doesn’t work for you, give the physical cash version a whirl).
This version is a digital version, where instead of separate envelopes you send the cash to separate accounts. These accounts will either be savings accounts (simply holding pots) or current accounts (used to actively spend the budgeted cash).
Alternatively, you can try a digital app version such as Goodbudget to help you with your digital envelopes.
- See your fun money instantly – whatever the balance is should last you until your next payday
- Don’t feel guilty again – got money in your fun money account? Go ahead and buy whatever you want, it is literally for that purpose
- Flexibility to drip feed in the physical cash each week from a separate savings account if you prefer (I actually use this method, where I put in a weeks’ worth of fun money into my fun money account each week – that way it stops me from thinking I’m rich just after payday and spending 3 weeks’ worth in 1).
- Tracking – as it is in a current account you will be able to trace your transactions which will help with accountability. If you took it out in cash then you lose this.
- Have to open multiple accounts (both current accounts and savings)
- Not a simple financial setup – I am normally a huge proponent for stripping out any complexity from your personal finance processes, but I find this such a valuable technique for sticking to my budget that it is totally worth it
What do I need to do?
- Open an account for your main categories so you can divvy out your budget each payday. In the example of my categories above, I have an account for Housing/Bills (current account so I can pay standing orders/direct debits), Holiday (savings account), Travel/Groceries/Entertainment (current account or pre-paid card so I can pay using a debit card and track my expenses).
- Each payday, send the budgeted amount to the relevant account and any personal profit on to your savings/investment accounts or to pay off your debt
- Only take your fun money account debit card out with you to stop you from being tempted to buy stuff on your credit card (travel/groceries/entertainment).
See related: best spend tracker app UK
What if you still can’t stick to your budget?
Is it due to your discretionary spending (just like me)?
Then try the physical envelope method, the visual cue of the depleting cash may be enough for your to stick to it. I found the inconvenience too frustrating for it to be sustainable, but whilst I did it I found it very very effective and my spending dropped.
If you still can’t hit your discretionary spending, you’ll need to start to make some bigger lifestyle changes to change your behaviours that lead to spending. Try my COST method to save money fast, or alternatively comb through these 13 easy wins that should get the ball rolling on saving money.
Try watch out for your spending triggers and think of ways to overcome them, which will help you get on top of your impulse spending.
Also, if you’re not in a too bad financial position and you’re not wanting to change your lifestyle too much (say you’re already at a decent personal profit level and are happy going at your current level of intensity), then why do you need to hit your budgeted level?
Revisit your budget and simply increase your budgeted spend on groceries/travel/entertainment so that it is at a sustainable level for your ideal lifestyle.
Not everyone needs to be a super frugal money saver, and sticking to a budget consistently allows you the beautiful ability to accurately forecast.
So if you’re in a good position with a decent personal profit already and you’re not able to stick religiously to your budget, then consider increasing your budgeted amounts.
If it isn’t related to your discretionary spending, is it your housing/bills that are the problem?
If so, you need to revisit your budget. Housing/bills shouldn’t be too variable and critically they are recurring. If you’ve misbudgeted, then correct your budget. i.e if you thought your housing costs were £500 per month but they’re actually £700.
This strategy worked well for me, and can help develop the skills to work towards your financial goals such as paying down your debt, building an emergency fund or investing for your future.
Let me know how you got on with this technique, always love hearing how it works for you. And if you’ve got a technique you use successfully then I would love to swap notes and hear about it!
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