One word you need to say to control your money

Here's how to avoid some common budgeting problems. Images: Getty
Here's how to avoid some common budgeting problems. Images: Getty

One of the biggest challenges for a budget is unexpected expenses.

While your budget will differ month to month, the broad shape of it should be the same. That means that when it comes to sticking to your budget, it’s critical you know when and how to say “no”.

The good news is that it doesn’t mean the end of your social life.

“One tip for what you can do with your girlfriends is saying, ‘Hey girls, I'd love to come out but I'm trying to save for this at the moment so I'm not going to be able to have five cocktails,’” the founder of the careers and finance education hub the Smart Women Society Téa Angelos told Yahoo Finance.

“Just being a lot more open about your goals with friends and letting them understand that you're actually saving really hard for something and it's something that you really value - that's going to create a more open dialogue and communication.”

And once you begin that conversation about your financial priorities, you’ll likely find that most people understand and are happy to compromise, whether that’s drinks at home, a morning coffee or simply a cheaper venue.

Here’s how to overcome the other major budgeting hurdles.

Curbing impulse spending

Understanding the difference between a need and a want is simple, but using that logic to dictate your spending habits can be harder.

Angelos suggests that those who struggle with impulse spending tap into their emotions.

“The biggest thing with impulse spending is firstly just recognising the mood that you're in when you want to impulse spend,” she said.

Are you spending because you’re bored, stressed or sad? Try to find another way to address those feelings that doesn’t involve your credit card.

Then, try a few distancing tricks. If you spot an item you love, try to wait a day or two before following through with the purchase. There’s a fair chance that by that time, your passion for the item has dimmed or disappeared.

If it hasn’t, work out whether you’re really willing to pay for it.

“Calculate how many hours you’d have to work for it. If you make $25 an hour and you really want the $100 top on THE ICONIC, are you willing to work four hours to be able to afford that top,” she said.

“That changes a lot of people’s mindsets a lot, because they think, ‘Actually, I don’t really like this enough to work half a day for it.’”

Another way to keep your habits in line is to keep a list of things that you know you need on your phone. Then, if it’s on the list, you can get it, because you obviously need it.

Finally, unsubscribe from newsletters. It’s harder to say no to a sale at Sass and Bide, Cotton On or Target if you’re constantly being bombarded with marketing material.

Fighting lifestyle creep

So you got a nice pay rise: should your budget change?

When it comes to your savings, Angelos suggests you find a middle ground: you work hard for your money and you should be able to enjoy it. But be careful not to absorb your total pay rise into a significantly more expensive lifestyle.

“The ideal situation is you try to find a balance between the two extremes. When your income increases, put extra money towards your debt, savings or investments but also you get to reward yourself as well and elevate your lifestyle,” she said.

That means conscious spending. Rather than wasting all of the pay rise on drinks or dinners, it’s worth investing in something that will improve your lifestyle over the longer term like a good pair of running shoes.

Eye on the prize

Even the most dedicated savers can struggle without motivation.

Working small rewards into your budget means you can celebrate the little milestones without derailing the entire strategy.

However, you’ll need to figure out which rewards work for you. For a major savings milestone, it could be a nice dinner out. For a smaller one, it could be a cheaper dinner at the pub or a purchase you’ve been eyeing.

But it’s also worth considering much cheaper rewards, like an at-home pampering session or a movie night with takeaway.

Recovering from a splurging relapse

If you fall off the bandwagon, the most important thing to do is simply begin again.

“At the end of the day it comes down to your mindset and really flicking that switch between your budget meaning your life is over and it's boring,” Angelos said.

Instead, it’s critical to understand that your budget is just a plan for your money.

“If you've fallen off the bandwagon in one month, and you've completely blown it out, just be kind to yourself and get back on track. Any step forward is better than no step forward.”

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