19 Apr Learn budgeting skills, conquer your money demons
I’ve always been terrible with budgeting, always over my budget, going into overdrafts and relying on my partner to bail me out.
Money has been an issue for as long as I can remember. I’ve never actually budgeted and stuck to it. I have made an attempt at budgeting, only to blow it as soon as I saw something I wanted.
I seem to have a fantastic ability to override my budgeting instincts to say yes to the things I wanted, somehow assuming that my next paycheck would solve my problems or something would turn up. Unsurprisingly it didn’t.
Strangely enough, I even used to openly tell people that my financial abilities were my worst qualities. That’s almost like walking up to someone with a sticker on your head that says ‘Don’t trust me, I’m terrible with money’.
I accepted that I was poor with money with no deliberation, accepting my fate as an eternal struggle with my account balance. I even used to avoid going to the cash machine, so I didn’t have to see my budget. That’s not just avoidance, that’s just plain stupidity.
But here’s the question; Is my inability to budget actually to do with me or are there external factors which come into play?
More importantly, can I overcome these demons and finally become good at managing my money?
Can I blame my terrible budgeting skills on the past?
Apparently, yes I can! There are research papers that link students money management skills to their parents. According to some studies, seventy-five percent of American children learned most of their money management skills from their parents.
I had a good childhood, but my dad was always pretty secretive and controlling about money. My mum depended on him for everything we wanted. There were never any discussions about money between them. Consequently, there were never conversations about money near me or to me. I always presumed this was normal.
Interestingly, some research seems to suggest that a radio silence on the subject of money isn’t that uncommon in western households; many families don’t discuss family debt, especially near their children. Maybe there are droves of individuals in a similar monetary situation to me.
You could conclude that the absence of family discussions about money, especially debt could be a historical family trait, passed down through the generations. Maybe, I’m the first to question our family’s financial behaviours!
Once common monetary habits are learnt, they can escalate quickly.
My first jobs would consist of me getting paid and working out how to buy as many things as I could, whether I needed them or not.
When I wanted to go out, and without the money to do so, I used to borrow from my mum regularly. When I went to university, I simply used bank overdrafts and credit cards instead.
I never went mental like some people do, accumulating massive amounts of credit card debt. But I did live out of my overdraft for about ten years; I must have paid about £1000 over that period in arranged overdraft and late payment fees from my bank and my direct debits after missing payments.
It’s obvious that this is a stupid behaviour. Deep down I knew I had a problem, but it’s easy to push the problem further down the road.
When I read pieces of financial advice on the internet, they all say the same thing:
- Don’t spend more than you earn
- Pay off debt
- Create a budget and stick to it.
It’s all pretty obvious now, but even so, I have only managed to control my finances in the last few years. Generalised advice is great, but it misses the behavioural aspects of learning to budget. It was important for me to understand the motivators behind my budgeting, why they existed and to create ways to overcome them.
In writing this article, I’ve learnt that budgeting is a behavioural problem, not a fiscal one. Talking openly about my issues with budgeting is my way of understanding myself and learning not repeating my bad habits.
Why I put off learning budgeting skills
If budgeting is a behavioural problem, then to understand the drivers behind the problem can lead to the solution.
My view of money has been a negative one. We have had a constant stream of financial crises and scandals over my life. Years of financial problems reported on the news are enough to set anyone’s mind against the positives of wealth.
Also, there is a more emotional tie to my negative views. My father went bankrupt when I was little. He had dedicated his life to building his business. When it went under, it profoundly affected him and our family.
Take these as a context to my story, and you have the perfect background for my negative feelings towards budgeting.
Avoiding to budget altogether
My general approach to budgeting was avoidance; I just wouldn’t do it. I would spend the money I had when I had it.
Occasionally, I would make a budget just after getting paid I usually drop the budget as soon as it came to sticking to it.
Strangely, I found budgeting easy because I associated it to the future. Much like someone has the ambition to run a marathon and to go running every day. They buy the gear, the then give up in the second week. Dreaming of the future is more attractive than the present, and you have to go through a tough time to turn that dream into a reality. This reason is why people shouldn’t make drastic new years resolutions; you are setting yourself up to fail.
My budgeting behaviour was doomed to fail
Budgeting for me is like signing up to a gym, going a couple of occasions at the start of each month, giving up and repeating after a few weeks. The official term for this behavioural problem is called ‘false hope syndrome‘, where people keep trying to make behavioural changes, fail and repeat. Often with no long term gain.
Even after failing you can justify the effort. When speaking to my partner, I would say ‘I needed this’, or ‘I was expecting some money because of that’, rewriting my failure as out of my control. Gamblers have been known to show this tenancy. When bettors lost money, they have a tendency to rewrite their losses as ‘near wins’ rather than losses.
Learning to budget needs to be approached similarly to someone overcoming a gambling addiction. A budgeting habit isn’t quite as exciting (or dangerous) as a gambling addiction, but trying to understand this problem as a context to stimulating behavioural change, may drive the long-term budgeting changes I want to achieve.
The psychology behind a good budgeting habit and how to make use of it to change your ways.
According to Gardner et al., habits form through the repetition of one behaviour within a stable, repeated condition. You are more likely to succeed by changing one part of your daily routine than by changing everything drastically.
For me, this means checking my bank balance on my phone every morning, as soon as I wake up. This process doesn’t take long and gives me a reminder of where my budgets are. This simple step helped me with my money avoidance issues. I can see when things come in and how much I have left. This stopped me leaving anything to my imagination and I ceased doing things when I knew I was getting close to the bottom of my budget.
Once I got used to this, I started using a budgeting app ‘You need a budget’ to map out my spending.
At first, it was horrible, but after a while, you start seeing where all of your money goes. Having to input every purchase makes you appreciate where your money is going. When you spend too much at the pub, you feel it when the transactions hit your budget over the next few days. It forces you to confront your money demons every day; it forces you to prioritise your budget.
The building blocks of great budgeting behaviours
If you are looking to overcome your bad budgeting habits, here are a few key areas to look at:
Understand why you are terrible at budgeting and how to overcome those challenges when they arrive.
Break down the different aspects of the challenge ahead to know how you are going to deal with them can see pitfalls before landing in them. This process didn’t stop me from falling in them; it did mean that I did see when I was falling in them so I could slowly change my behaviour over time.
For me, I wrote this blog to try and understand the why, what, how and when of how I was going to control my habiting.
Such an approach might be extreme for most people, but for me, I found it a good way to explore my behaviours and learn how to change them. An easier route might be just to write a list of problem areas, use this article to save time if it helps.
Self-efficacy – Your personal belief in your ability to budget.
Budgeting is much like any change you want to make, if you don’t believe in your power to change, you won’t.
I found visualising myself as a good budgeter helped me. Even though I knew I wasn’t a good budgeter yet, visualising myself as a great budgeter made me think about what decisions I should make. I made better decisions as I saw my actions as a progression into my future self, not my current self.
Being able to fall off and not be phased
I still make poor budgeting decisions and realise afterwards. I see these mistakes as a learning curve and try not to beat myself up about it.
By seeing budgeting as a destination, I feel less guilty about going off course. I just bring myself back to the track and get started again, trying to learn from each mistake. Over time I got sidetracked less, the process became easier.
Speaking openly about the budgeting changes
I found talking to a few close people about your goals helped to motivate myself. I explained the problem I was trying to overcome, the steps I was taking and how it felt. The feedback I got from people was always emphatic, and they often could relate to the situation.
When I did something good, I would say so in an email to my partner. It can feel stupid but having people recognise the change is important. As most people don’t talk about budgeting as a problem, it is easier to hide. To speak about it openly helped me get the recognition I wouldn’t normally get from talking about budgeting. Budgeting is not like the gym; nobody is going to give you a compliment in the street. You need to build your own compliment audience!
Understand what money is and what it can do.
Money should be about enablement and freedom. At first, a budget feels like a constraint on your wallet when implemented. But, once I got used to one, I found out that a budget frees me from the anxieties that not budgeting gave me.
For starters, conversations with my partner are much easier. My budgeting habits were always an issue; now they are not.
Being in control feels nice. I know what I can and can’t do within a given month. A weight I didn’t know I had has gone.
Money doesn’t buy you happiness, but learning good budgeting skills can make you a little happier by taking away something that used to worry me. Of course, we still get money issues, but at least now they are expected or of outside of my control.
In writing this article, I now understand my behaviours and can change a problem I have been avoiding for years.
I have learnt practical information about how to change my behaviours for the long term. If I can change my budging behaviours, surely I can change other aspects of my behaviours too. For that, this process has been invaluable.
In a similar situation? Start to focus on your habits. Free yourself from the shackles of bad budgeting. There is never a bad time to get change your budgeting habits.