When it comes to finances, many people struggle with expenses, debt, income, and savings. It is hard to plan your finances when you don’t really know where to begin, and this is where most people go the traditional budget route and start writing all their expenses and income down on paper. However, it has been shown that budgeting is not the whole answer.
The trick to being financially free and increasing your net worth is more about changing your behavior. According to the famous book “7 Habits of Highly Effective People“, anyone can change their future and take hold of their lives, by following a few simple habit transforming rules. Budgeting alone cannot help you change your financial fate – you have to get to the source of the problem first. Let’s take a more detailed look.
Being Positive and Proactive
Lots of people live paycheck to paycheck, and always shift the blame to other people or things in their lives that have contributed to their poor financial state. Being proactive is the first step towards getting you on the right path. This basically means taking responsibility for your actions and not complaining about bad things happening to you (which is called being reactive). For those who habitually blame others for how their lives turn out are missing the big picture.
Think about those people who were born into poverty, who struggle growing up in bad neighborhoods, with no parents, or who even experience abuse. People like this often find a way out. They manage to take control, go to college, get a good job, and plan their finances correctly. They haven’t used their poor upbringing as an excuse for not making money or getting into debt. Why should you?
How Do You Start Being Proactive?
Well, this is the hard part. For those who have subconsciously started taking on a reactive behavior instead of being proactive, it is usually a process that has evolved over time, and due to many outside influences. But here is the good news! You are in charge of these influences. You can say no! You have a say in everything that happens in your life. So, here is what you can do if you are struggling to keep your head above water before you even start budgeting:
• Say no to peer pressure – If you are being pressurized to visit with friends, go out to eat, attend concerts and socialize when it is outside of your means, then you need to step up and tell people. Yes, it might be hard for you to admit that you are having money problems, but all you need to say is that you are living a more frugal lifestyle and wish to cut back on your spending for a while. Ask your friends to think of other, cheap, or free ways to have fun together, like hanging out at someone’s house instead of going out to a restaurant every week.
• Be realistic about your spending habits – The well known financial expert, Suze Orman advises that you ask yourself 3 questions before you buy anything. 1) Do I need it? 2) Is it kind to yourself? And 3) Is it true for yourself? If the answer to any of these is no, then put the item back and walk away. If it helps, resist the temptation by avoiding shopping malls, and convenience stores as much as possible. Don’t even browse through home décor and fashion magazines.
• Start taking responsibility for being positive – The first thing you need to do to change your behavior is to start thinking positively. Say affirmations to yourself like “I will stop spending unnecessarily” or ” I can start saving x amount each month”. Taking responsibility and not ignoring the problem is the ultimate first step.
6 Effective Steps
The other steps that you can implement that will help you change your behavior towards money and spending that will help you actually draw up a realistic budget and stick to it include:
• Have an end goal in mind. Focus on what you want to achieve and use this vision to keep you on the right track.
• Get your priorities in the right order. Think about what you know is right for you, and not about what would be nice or what other people want.
• Think Win-Win. You need to get out of the habit of comparing yourself to other people and thinking that because your friends might have money that you can’t for some people. There is plenty of everything to make everyone financially stable. Similarly, don’t compare possessions. Net worth is all about assets, not about what material objects you have.
• Communication is key. Work together with your spouse or partner to create a positive, encouraging environment for frugality.
• Find new ways of doing things. Don’t just follow the crowd, but find ways that work for you that help you keep your spending in check such as taking a packed lunch to work instead of buying out every day.
• Be organized. This is perhaps the most common reason for wasting money. You have to pay a parking ticket because you lost track of time, or you can’t find something so you have to go out and buy another one. This also means planning your day so that you take extra water and snacks for the kids when you go out etc.
As you can see, changing your behavior first is the ultimate goal that you should be looking at when you want to take control of your finances before you even look at budgeting.
My name is Kevin Watts and I am the creator of Graduating from Debt. I was like millions of recent college graduates in heavy debt with very little hope. With the right attitude and discipline I took control of my financial picture and now I can say proudly that I am debt free.
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