Early in the pandemic, many of us had ambitious goals to fill up the “free time” we gained while staying home. We could learn to speak Italian, play a musical instrument, or bake sourdough bread from scratch. The pandemic gave me the opportunity to pursue my passion for studying art history.
It also opened the door to learning a useful new habit – and sticking with it. I am talking about the joy of budgeting.
For many of us, sticking with a budget is a challenge. For example, while 7 out of 10 respondents in a recent TIAA Financial Wellness Survey said they had a budget, only 25% said they followed a detailed plan.
Here are three lessons I have learned from my budgeting journey so far:
1. Automate It!
Gone are the days of Excel spreadsheets. Some of my client families with substantial household budgets use sophisticated tools such as QuickBooks. Yet for most of us, new apps such as Truebill, Mint, and YouNeedABudget are perfect. You can link your checking, savings, credit card, loan, and investment accounts, set a monthly budget, and – voilà – all your expenses are automatically tracked and categorized in spending buckets. Most apps also help users pay down debt, calculate net worth, and track financial goals.
My favorite is Truebill (no relation to Cerity Partners) because it gives you the ability to view and easily cancel mobile subscriptions and renegotiate monthly bills.
2. Gain Greater Visibility
Gaining visibility into your spending patterns gives you greater control over your financial life. My personal budgeting journey began because I was curious about my spending. With travel halted, remote work replacing time at the office, and social events canceled, clearly there were savings to be had, right?
Wrong. Some categories behaved as expected, with more funds going to family care, health and wellness, and those gourmet groceries for home-made meals.
Yet some categories were surprisingly stubborn. Ridesharing was one – where was I possibly going? Online shopping for attractive athleisure clothes and exercise gadgets also increased – okay, I was not alone there. Finally, and most puzzlingly, was dry-cleaning. Surprises aside, understanding my spending patterns made me feel in greater control of my finances when few things seemed certain.
3. Prioritize What Matters Most
Behavioral finance is clear: we save when it’s easy to save. That explains the success of employer-sponsored qualified retirement plans such as 401(k). While it’s simple to put away a year-end bonus payment, most of us need help with saving on a consistent basis. Effective budgeting provides a clear picture of where our money is going and allows us to prioritize our spending on what matters most for both the short and long-term. Apps are a great solution. Many apps automate periodic remittances to customized savings buckets, such as upcoming vacation, buying your first home, or ongoing education. My second art history course at Sotheby’s, here I come!
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