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Budgets and Diets - The reasons why most fail are strikingly similar

MONEY TALKS - Turn on the TV today and within minutes you’ll see several commercials with a weight loss solution designed just for you. “Drop 5 pounds in a Week,” “21 Day Fix,” “How to Lose Weight Fast.” Many of these program are well intentioned and will help you to lose weight, but, as many of us know from experience, they can be difficult to stick with. The same can be said for budgets.

Similar ConceptsAt their core, dieting and budgeting are very similar concepts. A balanced diet works when you burn more calories than you take in. Likewise, a balanced budget works when your income exceeds your spending. The fundamental concept of earning (or burning) more than you spend (or blend) is simple to understand yet hard to practice.

Common Denominator - The common denominator in any unsuccessful diet or budget is the feeling of deprivation. No one wants to be starved of their favorite food or weekend activity, particularly when the gratification of a fatter bank account or thinner waistline is so far away. With no immediate rewards, we often concentrate more on the loss. The challenge is to change our perspective and develop a process that better aligns our goals with our emotions.

More Satisfying ApproachWhen creating a budget, many of us start by drafting a list of expenses followed by the daunting task of identifying the specific areas we can cut back on or live without. The problem with this process is the focus is on how much we can take away or deprive, not how much we can save. A better and more satisfying approach is to decide how much you are going to save per month, save it, and spend the rest.  

Where to beginSo where should you begin? Create a checking account that you use to pay all your fixed household expenses like your mortgage, utilities, car loan, etc. Each time you get paid, say 2x a month, put the equivalent of ½ of your monthly expenses into the household expense account. In addition, set up a savings account for bills like insurance or taxes that may not occur monthly. Figure out the total annual cost of all your non-monthly bills, divide by 24, and put that amount per paycheck into the savings account. Whatever is left from your paycheck after funding your household checking and savings accounts is your spending money. However, before you begin spending your disposable income, take $20 and put it in an envelope in your desk drawer labeled “long-term savings.”

Start SpendingNow start spending. The beauty of this system is it doesn’t matter what you choose to spend your disposable money on. Nowhere am I going to tell you where you can or cannot spend the money. The only rule is that when the money is gone you can’t spend anymore until your next paycheck. At the end of the pay period, if you still have money left over, gradually increase the amount you are saving until you find a happy balance between saving and spending. If you spent all your money and had to reach back into that envelop to grab your $20, try withdrawing your spending money each paycheck in cash. Spending cash is much more tangible then purchasing goods or services with a credit or debit card - you actually have to pull the money from your pocket, count it out, and hopefully take notice of how much is left as you wait for your change.

In ControlBudgeting, much like dieting, only works when you are emotionally vested in the process. By allowing yourself choices, you remain in control, making it much more likely you will “buy in” and continue the process. Giving clients options shifts the focus towards their goals, as opposed to their behavior, empowering them emotionally and inspiring them to stay the course and reap their future rewards.