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For a lot of women executives, budgeting requires a big change in behavior. It can be difficult. You can expect to wind up spending more money than you had budgeted in a given area, because that’s what you’ve been doing for a long time. I never expect anyone to completely change their lifestyle within just two months. Remember, you’re trying to change long-standing habits around money. Don’t be too hard on yourself – just acknowledge when you get derailed and be more aware of it next time. If you try for several months to limit your spending in a certain area, yet you keep getting derailed, don’t give up.
Just try another number.
Some folks will set themselves a fairly aggressive number for a specific line item like dining out. For their first month on their budget, they’ll order next to nothing when they go out. By the second month, their willpower has failed them, and they spend way more on dining out than they intended. They’ll be so discouraged that they’ll be inclined to give up on the budget altogether.
As their advisor, I’ll encourage them to simply revisit the number. I’ll help them look at the proposed budget amount versus the amount they actually spent and come up with a more livable solution that allows them to be successful. I’ll also go over the other areas of their budget and encourage them on where they made progress. It’s important to take encouragement even while you’re holding yourself accountable.
Some strategies for staying on track include the following:
Be present
Once you begin your budget, check in regularly. That doesn’t mean having your bookkeeper check in for you. Staying present with your money needs to be a personal endeavor – understanding your behavior, working on your habits, adjusting your plan, and celebrating all the accomplishments along the way toward funding your goals. Remember, you’ve been spending money in one way for a long time – the only way to change those habits is to be accountable.
Set up auto contributions
When you’ve earmarked money in your budget for specific goals, those should be the items that you pay first. I advise every one of my clients to set up an auto transfer to fund the goal. As soon as they get paid, it triggers an automatic payment to the accounts that fund their most important goals. Doing this ensures that you will always know your big goals are funded, and it also helps prevent your discretionary spending from being derailed.
Keep time horizons in mind
Chances are, there’s probably not enough money to fund everything. It’s okay. You’re going to have to make choices about which things are most important right now. It doesn’t mean those other goals won’t happen. They just won’t happen all at the same time.
Let’s say you want to save for buying a house in a couple of years, but you’d also like to have your four-year-old daughter go to a private university. Since your daughter is a good 14 years away from college, it may make the most sense to put more money into an account for the house, and less (for now) into the education fund. In a couple of years, once you’ve bought your house, you can increase the amount you’re saving for her college.
Everyone sees their goals’ time horizons differently. I have one client who wants to fund college for both of her young daughters. Not long ago, we sat down to review her finances and it turned out that thanks to a bad year at her law firm, she wasn’t able to make the full contribution to her retirement account this year. I suggested that in light of this, she contribute less to the girls’ 529 accounts. But she said she simply wasn’t willing to make that change. She understands the implication of this choice – next year, when her firm does better, that money will be going to her retirement account. That’s her choice, based on what is most important to her.
The process of planning is not a steady, straight path. You have to be nimble because things change. Sometimes life takes unexpected turns that require you to make different financial choices from the ones you planned on.
Don’t get discouraged by the need to prioritize. Some things will happen now, while other things will have to wait. It doesn’t mean they’re never going to happen. The point is to make incremental progress wherever you can and be consistent.
Engaging personally with the budget process
This process is about you and your spending choices. If you’re not engaged in the budgeting process, you can’t change your behavior. You have to go in-depth and figure out what your spending behaviors represent in your life. You have to do the work of re-categorizing those expenses if they’re not showing in the correct categories.
I had one client who sent her bookkeeper in to go over her spending with me. That does no good for her – she needed to put in the work of assessing her spending habits herself. It doesn’t help to have her bookkeeper see where her money is spent; she’s not the one with the problem. Real awareness and change only happen when you personally engage in the process.
Don’t be discouraged by where you are
When you start to automatically fund goals, seeing the progress is tremendously empowering. People may start out dreading it, but they feel so empowered when they see their progress after one good month.
There will be missteps. There will be times when stuff happens you didn’t budget for or you just blow it and buy something you shouldn’t have. That’s okay. It’s not the end of the world. It is what it is. There’s another month coming, and you have the power to get yourself back on track. The key is that you move in a positive direction over time with planning. It’s incredibly uplifting to see the evidence that you are finally in control of your own money.
Bridget Venus Grimes, CFP®, is founder and president of San Diego, CA-based, WealthChoice, a firm specifically focused on helping women turn their professional success into financial success so they and their families can live their ideal life.
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Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
