Have you drawn up a detailed budget and are struggling to keep to it? According to an article in the NYT*, it would be best to just give it up. Well, not exactly. But it does say that keeping to a strict budget might not be the best way to go about spending less or saving your money. The money and pyschology experts they interview say that a budget can be like a diet — it doesn’t often last long and may just end up with you standing at the freezer late at night devouring a quart of ice cream right out of the container.
It’s human nature, they say. We generally have trouble following through with our “best-laid plans.” And after a long period of focusing on restrictions — we binge. Compounding the problem is the abstract nature of credit cards and such. Watching cold, hard cash dwindle is far more painful and thus more effective in reigning in our spending.
Well, doesn’t this just turn everything on its head! Drawing up a budget or “spending plan” is supposed to be that tried-and-true first step to financial freedom, isn’t it?
So what’s a budgeter to do?
Since self control just won’t do the job, mental tricks and other strategies should be implemented, they say. For one, automating anything you can. A 401K plan that deducts automatically from your paycheck is an excellent example of this. The less say we have in the matter, the better, apparently!
After becoming more conscious of your spending habits through your own methods or a money-tracking site like mint.com, experts say having a positive goal, like saving for a vacation, is the way to go. Focusing on something we want, rather than restrictions, is a far better motivator, they say.
Another strategy they recommend is to divide your money into separate mental accounts: one being for “entirely discretionary or luxury spending.” According to one psychologist, spending a portion of your smaller “fun” account is far more meaningful than just taking it out from your entire monthly budget.
So, being more general about the whole thing is recommended here. If you want to cut spending, they say, rather than budgeting every little thing, just attack a few big categories where you can make the biggest difference. Work backwards, they say. Decide how much you need to save for something, like retirement or other goals, and then work with what’s left over.
So what about the issue of the abstract nature of credit cards and other modern methods of spending? A new wallet will be for sale sometime in the near future that gets harder and harder to open the closer you get to your spending limit (it will be electronically wired to your bank account).