Many people regard budgeting the same way they regard diets: an exercise of strict self-discipline and ultimately, denial. In fact, that couldn’t be further from the truth. The goal of budgeting is to empower you financially so that you can enjoy the things you want in life. Budgeting is about being smart with your money in a way that pulls you out of a perpetual cycle of paying debt and falling into debt, increases financial security and stability, and enables you to afford the things you need.
If the idea of budgeting instantly makes you nervous or tense, it’s really time to rewire the way you think about finances. Here are four essential steps you can take to change your money mindset, and establish a more secure and successful future for yourself and your family.
Step 1: Honestly assess your situation
A fear of finances often arises out of a fear of what we’ll discover when we take a closer look at our money matters. Ignorance may be bliss in certain circumstances but in the case of your finances, it’s guaranteed to land you in serious trouble.
The first step to adjusting your money mindset is to honestly assess and become fully aware of your financial situation. For example, what’s the relationship between your income and your expense? What debt are you in and how are you paying it off? What automatic deductions come off your account every month? Have you fallen behind on your taxes?
Step 2: Accept and make peace with your situation
Once you’ve come to grips with your financial situation, you’ll need to accept it and make peace with all the negative feelings that come along with it. Ignoring, avoiding, or blaming your money issues on someone or something else will only lead to bigger problems in the future.
No matter how resentful, angry, frustrated, guilty, or ashamed you are of your financial situation, it doesn’t matter whose fault it is or how you managed to get there. No amount of emotion is going to move you forward: only action. It’s through acceptance that those negative emotions will dissipate and you’ll find the necessary motivation to move forward.
Step 3: Realise the need for change
Having confronted those difficult and negative emotions, it should be much easier to analyse your money habits and the spending behaviours that may have landed you in financial difficulty. Sometimes people shy away from budgeting because they hate the thought of “being without”. They don’t want to feel controlled, restricted, or denied. Of course, budgeting isn’t about not buying the things you want, but rather about buying the things you want in a way that doesn’t leave you in debt.
It’s at this juncture that you should realise the importance of change. You won’t wake up tomorrow with all of your financial issues addressed unless you make certain changes, whether it’s as small as making your own coffee at home rather than buying it to-go, or as big as applying for a job with better pay. Most often, however, it’s lots of little changes that will make a huge difference and once you’ve got the ball rolling, you should find your financial mindset undergoing a significant evolution.
Step 4: Make it happen
Now that you’ve assessed the full extent of your financial affairs, accepted it, moved passed the negative emotion, and realised the need for change, you should be quite anxious to make it happen! Start with creating a liveable budget – one that looks at every single one of your monthly expenses and tightens your belt in the areas you’ve been bleeding money (such as retail therapy, eating out, unnecessary subscriptions and memberships) and leaves reasonable space for you to enjoy your life. Prioritise eliminating your debt so that you can stop wasting money on the interest and focus on saving for the things you want and need.
Changing your financial situation – no matter how bad – begins with changing your money mindset. By overcoming the terrible negative emotions that have held you hostage for so long, you can make an actionable plan to move forward and, ultimately, establish a healthy relationship with money.