Most of us go out of our way to avoid scary things. But the most frightening things we face daily are those related to money. If you let money matters scare you — like setting a budget, or taking a peek at your credit card balance — you could end up making some truly frightful financial decisions. Here are some tips for overcoming financial fear so you can make the most of your money.
The Fear of Budgeting
Budgeting is very scary to many people, regardless of their financial means. People often think setting a budget is either too complicated or too restricting. The thought of sitting down to design your budget plans might make you break out in a cold sweat. But in reality, your budget should be a helpful, a simple plan that will help you spend with confidence.
Working toward financial goals isn’t simply about saving money or paying off debt. It is about optimizing your cash flow so your spending is synched with your personal values and life goals. Every life goal requires a financial plan, because without one, we run the risk of sinking further into debt or blowing through savings. Managing your money with a budget is the first step to ensuring you put your money where your heart is.
Face the fear: Start small by focusing on a grocery or entertainment budget. Over time, you will kick your fear and manage your cash flow with ease and confidence. While there’s no simple formula for creating a personal budget, there are some basic guidelines you can follow to maintain a realistic and flexible monthly spending plan. If you are trying to reach some ambitious financial goals or are just tired of worrying about where your money is going, a budget is your ticket to freedom.
The Fear of Tracking Your Spending
When I first started tracking my spending, I thought it would just be basic math. That was until the numbers started to add up. We all know that we have money leaks — but actually identifying them is terrifying. For example, try adding up how much money you spend ordering in for lunch every month!
Face the fear: Tell yourself that not knowing is worse. Approach tracking with the mindset that budgets are all about transparency: looking at where your money is going. There is nothing wrong with spending your money as long as you are making conscious choices about what you are spending it on — and what you are not. Should you ever notice that you are not in control of your spending, be brave enough to question why. Let your fears empower you, not stop you, because embracing that fear makes it easier to choose your big-picture goals over immediate spending. Paying attention will eventually feel better than ignorance.
The Fear of Feeling Broke
Establishing a budget doesn’t mean that you must cut all the fun from your life, so stop starving your spending. Budgeting is a conscious effort to spend your income in any manner you choose. It is essentially a plan to spend, not a plan to prohibit spending. If you approach budgeting with the mindset that extreme frugalness is mandatory, you will be miserable and give up.
Face the fear: When you map out your budget for the first time, you might find that your income isn’t going to cover everything on your wish list. Still, you have a budget because you want to improve your life. Therefore, a good budget leaves room for fun stuff. You just have to figure out what fun stuff is really important to you. If that $100-per-month coffee tab makes you happy, keep it! Those little treats help maintain your motivation as you work toward your bigger-picture goals.
The Fear of Failing
A sustainable budget is flexible. Many people who start a budget get discouraged because expenses don’t always fall neatly in their preset categories. Unexpected expenses can creep up and knock everything out of whack, to the point where you feel like you have failed.
The beauty of a budget is that it can always be rebalanced at any time to adjust for irregular expenses and rainy days. Sometimes this is a struggle, but the only people who don’t wrestle with adjusting a budget are those who have no idea where their money is going in the first place.
Face the fear: Budget to expect the unexpected and you will be able to adjust for those pesky expenses with ease. Life is full of surprises, and part of your budget needs to account for these situations. If you don’t give yourself a cushion, you may end up sabotaging a goal or putting yourself in further debt. I like to include a category in my budget called the “What Now? Fund” and I let the money accrue in my savings if no surprise expenses come up.
In our consumption-based economy, it’s incredibly empowering to have control of where your money is going for the greater goal of reaching your personal definition of financial freedom. By creating a plan and tracking your spending, you will see just how far your money can go and what you can afford with it. Before you know it, you will find that you have a financial life that’s full of ease and void of fear.
Michelle Bobrow is a member of the DailyWorth Connect program. Read more about the program here.