Struggling to Budget Your Money: Try This 5-Minute Hack
You are trying hard to be financially responsible. But budgeting does not come easily to you. Why? Your focus is on things that you are missing out on.
But you understand that living on a budget improves your financial security. With a budget, you can work your way out of debt. You have enough to cover your bills and emergencies. And you can relax and have fun.
Why Is It So Hard To Budget Money?
Making a budget and sticking to it is like going on a diet. It’s tough. In addition to the math involved, you need a boatload of discipline.
Psychologist Brad Klontz explains why many people struggle to budget their money. “Your emotional brain responds to the word budget the same way it responds to the word diet.” You automatically think suffering, deprivation, depression.
Your natural instinct is to overcome this scarcity. So you end up spending money on the things you feel deprived of. By mid-month you’re counting down days until the next paycheck.
How To Take The Stress And Anxiety Out Of Budgeting
It’s this simple: Instead of calling it a ‘budget’, call it a ‘spending plan’. This simple tweak gives you a glass-half-full view of your finances. It allows you to focus on the things you enjoy and value.
The result: You begin to set goals related to things you enjoy. Then it becomes easy to work towards achieving these goals. A spending plan gives you control over your finances. You stop living paycheck to paycheck or feeling guilty about overspending.
Imagine having a spending plan that lasts years… And only takes 5 minutes to create. No tracking every penny you spend. No complicated budgets.
The 50–30–20 Spending Plan
With this simple plan, you divide your income as follows:
- 50% goes to needs
- 30% goes to wants
- 20% goes to savings and investments
Spend Only 50% On Your Needs
Needs are the things you absolutely require to survive and the bills you must pay. Groceries, utility bills, mortgage payments or rent, healthcare, car payments. If you earn $100 per month, ensure that you do not spend more than $50 on needs.
Limit Your Wants To 30%
Wants include things you spend money on but are not essentials. Things you can live without. Netflix subscriptions, dining out, vacations, ultra-high-speed internet. If your monthly income is $100, then spend no more than $30 on such non-essentials.
Savings And Investments Get 20%
Out of your $100 income, save and invest $20. Savings are those amounts you preserve for emergencies or future purchases — emergency funds or IRA contributions. Investments are amounts that make money for you like mutual funds, stocks, and bonds.
Unplanned expenses happen all the time. A child falls sick. You lose your job. With savings and investments, you’ll be prepared to weather these storms.
Final Thoughts
Simply thinking of your budget as a spending plan makes budgeting easier. Organize your finances for the week, month, and year with the 50–30–20 spending plan.
Happy planning!
