When I first started working, I kept a budget in an Excel spreadsheet. I recorded every single expense I had down to the penny. This was before there were tools like Mint, which would collect your credit card transactions and create budgets for you, and it was sometimes tedious to record every last transaction. I kept with it because I like to play with data and look for trends and “fun facts” (which is one reason why I wrote that post with fun facts from the Forbes’ Richest Athletes post ).
That said, I know for a fact that there were times I didn’t spend money because I wanted to:
- Avoid spending money that day – I kept a statistic of “zero spend days.”
- Avoid entering in that one transaction
It was silly. It was artificial. Did I save money? Maybe.
It all worked because I understood my tendencies. As the years passed, I overcame the “don’t want to enter transactions” hurdle (it led to me leaving receipts in a pile and batch entering them) by entering them in whole dollar amounts. That simplified things and made me dread the process less. I don’t keep a budget today but if I did, there’s no way I would track my spending to the penny.
And that’s the one of the great lessons in personal finance, and in life in general, is that you should adapt your systems to match your tendencies and your needs.
It’s extremely difficult to change who you are. Habits are tough to break (it’s better to adjust them slowly) and so it’s best to build your systems so that they, in conjunction with your tendencies, get you the best result. A good example of this when it comes to your health is snacking. We all snack. At around three in the afternoon, you start feeling a little hungry, you grab a snack. If your pantry is full of chips, crackers, and the like – that’s what you grab. If your pantry has no “junk food,” you turn to the fridge. Maybe you grab some fruit. An apple, a banana, some grapes. By not buying junk food, you avoid the temptation by not having it present itself. That’s creating a scenario in which you succeed.
How does this play a role in personal finance? If you know you are an impulse buyer, don’t save your credit card information in your browser. Amazon makes a killing off people using their 1-click systems because they know that it’s so easy to spend, especially if it’s just one click. It’s much harder to make an impulse purchase if you need to find your credit card. It’s even better if you freeze your credit card in a block of ice  and have to wait for it to thaw. 🙂
If you want to take on something new and significant, like budgeting, take advantage of ways to make that transition simpler. Try a service like Mint, which does a lot of the heavy lifting for you. Consider a low tech method known as envelope budgeting . Don’t be like me and track everything to the penny in an Excel spreadsheet unless you know that’s the type of thing you’ll keep up with easily.
Build your financial systems to match your tendencies.
(Credit: pasukaru76 )