When I first started diving deep into the personal finance community, the first tenant of Personal Finance 101 that stuck with me was the importance of a budget. There’s no way to know where your money goes without keeping track of it. It’s the same as monitoring your data usage. When you get an alert that you’re about to go over your data for the month, you start hunting down all the Wi-Fi hotspots within a three mile radius so you can stay under the limit. Budgets mean nothing if you don’t keep track of your spending.
Unfortunately, my idea of budgeting was to spend whatever I wanted and hope that it stayed within my budget. Most months this strategy was a complete fail. I logged into Mint every day to check up on my progress, but as the month continued and my budgets teetered on going over I ignored the spending alerts in my inbox and carried on my merry way. Then I’d go over my budget by $100-$200 and wonder what went wrong. Mint told me that I’d gone over on groceries, shopping, and the illusive “Everything Else”, but it offered no advice on how to change my habits. Even worse, I told myself I would do better next month to make up for it, but I didn’t identify where I’d slipped up and what adjustments I should make.
I drove myself crazy splitting transactions between categories and messing with dates to stay within my limit. Maybe if I gave myself more breathing room in each budget I wouldn’t go over so easily. But I was just lying to myself about my own spending. That haircut in June doesn’t count because I budgeted it for July, so I’ll just change the date so it falls under July’s budget. That hefty Costco charge posted in September instead of August, so I’ll change the date from September to August so it doesn’t affect my current budget. Out of sight, out of mind. And zero accountability.
These bad habits created an unhealthy relationship with spending that amplified my frustration. Month after month I blew through my budget despite my best efforts to track my spending. I felt terrible about my spending habits. Even though I’d managed to pay off my student loans and build up a healthy emergency fund, I felt like my careless spending was preventing me from saving as much as I could. If I wanted to ramp up my savings, I needed to tackle this problem once and for all.
Here’s the thing about online budgeting tools: they make us think we’re doing everything we can to keep a budget. The site imports our bank accounts automatically, so all we need to do is check in every once in awhile. Mint, Personal Capital, You Need A Budget, and other resources are fantastic for big-picture perspectives of your spending. They are a great starting point for thinking about budgeting. But in order to change your habits, you need to get into the weeds and examine every single purchase. Don’t worry about what happened in one month versus another; look at it holistically. Decide whether a purchase was worth your time and money. Then let go of the guilt and start making changes.
Our feelings about money are messy. It’s difficult to look at our spending habits objectively when they feel like a reflection of our judgment. Maybe this is why so many people struggle with massive debt – we feel guilty that we don’t manage our money and we don’t think we can change our ways. We ignore the problem until it spirals out of control.
But if you put in the work and get a handle on your monthly spending, soon you won’t need to be so vigilant. You’ll coast through each month on frugal autopilot because your spending won’t fluctuate as much. You’ll be prepared ahead of time for surprise expenses because you already set aside money for them. Your spending choices won’t be tied to emotion, but to necessity. Use budgets and spending trackers to your advantage, not as a crutch. After all, that’s all money is at the end of the day – a tool we use for our benefit. Don’t be scared to tackle these issues head-on.
~ Ms. RW