The Money Diet
Have you been on a diet? I have. A million times. And it never works. Well, it works for a while, then I go back to my old weight and then some.
Diets are a lot like budgets. It's hard to follow a budget. Why? Budgets, like diets, at least the way we do them, often restrict us. And usually, whatever's prohibitive, we do. We like eating fatty food and junk food in the same way we like eating out and watching movies. Or buying clothes. Or drinking a capuccino everyday. So once we deprive ourselves, we end up frustrated and then give up.
That's why I'd rather call a budget a "spending plan". You can say "a rose by any other name...", but you have to start thinking of a spending plan as a "plan for spending". Duh, right?
Think of it this way. We think of a budget as a restriction on what we cannot spend. But that never works. People find it hard to process negative things. But once restated in a positive way, then it can work. So if you start thinking of what you can spend on, not what you can't spend on, then there's a greater chance of succeeding.
It's the same with diets. Diets that focus on what you can eat and what you can do to lose weight tend to work better than those that tell you what you cannot eat.
For instance, we began an allowance system. My wife and I allocated a certain amount each week for our lunches and other daily expenses. That's all we have in our wallets. Instead of withdrawing anytime from the ATM machine, we live with our allowance. And our focus becomes: With this much, I can eat this and that...
The other thing is that a spending plan must be realistic. Too often, budgets are so out of touch with reality that they're doomed to fail. No budget for clothes? Of course not. No budget for coffee? Impossible.
Of course, you need to cut back, but don't cut back entirely unless absolutely necessary. One trick is to cut a little across all expenses. A little of this, a little of that. Work on a plan you can live with. And don't wallow in self-loathing if you go over it. Just make certain adjustments, say skip the movie this week and rent a DVD, until everything balances out.
Replace bad habits with good habits, just like when dieting. It's a bit hard at first, until you get used to it. Instead of buying a book, maybe you can spend some time browsing at the bookstore. Instead of buying a new magazine, buy cheaper back issues. Or check the magazine's website. You can be as creative as you want -- there's much to enjoy in life without overspending. Once you get into the groove of things, you can go on auto-pilot without groaning or whining.
Always go back to your financial goals, if you need a boost in motivation. And remember, your spending plan is not cast in stone. Once your income increases, you can make adjustments. When you pay off your debt, then you can allocate more to savings.
