When it comes to saving and spending money, we’re not all the same. Yet, the financial advice world has treated us as if we are, particularly when they tell us to ‘do a budget’.
Budgets don’t work for most people and here’s why they fall short.
- Budgets can feel restrictive and uninspiring, leading users to frustration and failure. Many people view budgeting like dieting or regular exercise and once we fail to not spend as allocated, in comes the feelings of guilt and failure and we’ll be less likely to stick to it or want to continue using it.
- Creating one can be time consuming, especially if you don’t have the tools, confidence, or competency to put one together.
- Budgets can be complicated. Figuring out how much money you’re going to spend on every little category can be daunting and feel restrictive or too disciplined. They often leave no room for error, unexpected costs or spontaneity.
- A negative mindset or lack of motivation can hinder your budgeting efforts as they can reinforce the idea of scarcity and limits. If you believe that budgeting is restrictive or that you’ll never achieve your financial goals, it can become a self-fulfilling prophecy.
We believe finances are personal, that’s why they call it personal finance.
So, what works if budgeting doesn’t?
A Spending Plan
Firstly, let’s change the language from disempowering and restrictive to empowering from this day forward, a ‘budget’ will be known as a ‘spending plan’.
A plan you’ve created on how you will spend and save your money in the future.
Automation
Calculate your fixed costs (rent, mortgage, utilities, food etc) and the amount you wish to save each month. Establish direct debits that total the amount of your fixed costs, to a separate account – then you know all of your financial obligations are funded.
Next, establish another automatic funds transfer with the regular amount you want to save. The remaining cash flow each month, is what you have left to spend on discretionary spending. When it’s gone, it’s gone. This is known as Pay yourself First.
Luckily, in today’s technology driven society there are a multitude of tools, platforms and apps you can use to monitor, transfer and automate your savings.
Goals
At Wealth Maximiser, we believe setting and focusing on your goals is one of the most important financial actions to complete. Having goals gives our money a direction and purpose, as well as motivating us to create healthy financial behaviours with our spending and saving.
Accountability Partner
Having an accountability partner to regularly check in and monitor how you’re progressing with your savings goals, offering encouragement and support, especially in the challenging times is invaluable.
That’s why our service includes access to a Wealth Coach, a friendly and encouraging expert to hold you accountable. When savings and cost cutting feels like a chore, having someone cheering you on and empowering you to achieve your financial goals can provide the motivation you need.
By embracing these approaches, we can move away from traditional, often ineffective budgeting methods and toward a more personalised, sustainable way of managing our finances and cashflow.
Disclaimer
This information is of a general nature only and does not take into consideration your objectives, financial situation, or needs. Before acting on this information, you should review the Wealth Maximiser Financial Services Guide and Wealth Maximiser Terms & Conditions and consider this information in light of your own objectives, financial situation, and needs. Wealth Maximiser is operated by NobleOak Services Limited ACN 112 981 718 AFSL 286798.