Making mistakes is normal when working with money. It happens to the best of us, and I hope you will keep trying. Here are five of the most common mistakes I see and my advice on how to fix them.
1. I Don’t Stick with Budgeting Long Enough
When creating a new habit or learning a new skill, it’s important to set realistic expectations. When I was learning to play the guitar, I was having a hard time with barre chords. Luckily, everyone I knew who played guitar warned me that mastering barre chords can take months and my frustration was completely normal. Learning to track and plan your monthly spending takes time as well.
It takes an average of three months to get used to the budgeting process. The trouble with creating a monthly plan is it takes a month to get feedback. Recently, Anders Ericsson and Robert Pool wrote a book together titled, Peak: Secrets from the New Science of Expertise, and you learn how to reach peak performance in anything. A key aspect of mastering any skill is to understand the seven traits of deliberate practice.
The fifth trait of deliberate practice involves feedback. Ericsson and Pool say, “Deliberate practice involves feedback and modification of efforts in response to that feedback.” You won’t master the skill of budgeting right away, but the feedback you receive in the first three to four months is enough to make you comfortable.
If you have tried budgeting before and didn’t stick with it, try again with the intent of lasting at least three months.
2. I’m Just Not Detail Oriented
My wife and I argued over the budget when we first tried. I was tracking how much we were spending on bathroom items, cleaning supplies, and kitchen supplies. I had gone off the deep end and was micromanaging the plan. I become exhausted with debating and dissecting Target and Wal-Mart receipts.
Finally, I said, “Why don’t we make one big category? If we buy something for the bathroom or to clean anything in the house, it will go into the ‘Toiletries/Cleaning’ category. How does that sound?” My wife laughed and said, “About time.”
I stretched too far in the direction of details, and I learned an important lesson. Now when I coach my clients, I make help them learn to recognize when to say, “Good enough.” The plan you make for how to spend your money should be as detailed as you need and no more.
If you get frustrated over the little things, stop trying to track them. Start grouping items together into larger categories.
3. I Don’t Know Where to Cut Back
Grouping too many expenses together can be the opposite problem of being too detail-oriented. One couple I coached decided to create a large Wal-Mart budget. They shopped at the superstore for everything. Food, auto repair, clothing, and cleaning supplies. At our second meeting, they had taken my advice and created a $1,000 Wal-Mart category.
The amount didn’t shock me because think about how much you spend on everyday items. You can buy nearly everything you could ever want at a Wal-Mart Superstore. Yet, the idea to have such a large category in your budget comes with a warning.
If you spend too much money in the month, it will be hard to figure out what you splurged on. You might create a “black box” inside of your budget and hide your mistakes. As a second example, I coach my clients to separate their spending on food between groceries and eating out. Tracking the spending between fast food and restaurants is too detailed, but labeling everything as simply food is too broad.
If you are having trouble figuring out where you are spending too much money, try to be a little more detailed when tracking your spending.
4. I Hate Constantly Sacrificing
Life is too short to not have some fun. I make sure my clients set aside money to enjoy life and find happiness. The good news is happiness is a lot cheaper than you might expect.
In her book, The How of Happiness, Sonja Lyubomirsky talks about the various skills and habits you can gain to be happy. Practicing gratitude, meditating, and nurturing social relationships are some of my favorites because they cost little money to implement. Other ways of being happy–like exercising and having hobbies that create flow experiences–do cost some money. The choice of how much you spend is up to you.
If you feel like budgeting is too constricting, remember that you are spending less money in one place to reach a goal somewhere else. Having a little fun and being happy is important, too.
5. I Don’t Keep Myself Accountable
I have trouble keeping myself accountable when it comes to my fun money. It’s hard for me to turn down an invitation for a bite to eat or a drink with friends. Admitting that publicly is hard for me, but it’s true. If you are finding it hard to keep yourself accountable, there are two great strategies to try.
Humans hate losing. The amount of pain you feel losing $100 can be twice as much as the amount of joy you feel when you win $100. Making a bet with friends to reach a goal can be a fantastic motivator. If you don’t want to rely on your friends, you could try Stickk.com. It’s a website that will charge you and donate your money to an organization you hate (or an organization you love) when you don’t reach your goal.
If you can’t afford to lose any money, public embarrassment works great, too. Make the same bet with friends, and if you don’t reach your goals, your friends get to post an embarrassing photo on social media. Imagine seeing an old junior high photo on Facebook. I bet you’ll pay off your student loan a little faster.
If you have trouble keeping yourself accountable and rewarding yourself doesn’t work, try making a bet and losing something if you don’t reach your goals.