my two cents

I Already Blew My Budget. How Can I Get Back on Track?

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Financially, I’m starting over right now. I got laid off last summer because of COVID, and I scraped by on unemployment plus what little emergency savings I had (about $500) plus some of my 401(k) that I cashed out. Luckily, I managed to stay out of debt — but just barely. (I have student loans, but they’re on hold.) 

Finally, in December, I was able to find a new job. I’m making significantly less than I used to, and it’s not exactly the position of my dreams, but it’s a huge relief to have any kind of income. I started the new year with aggressive plans to get my financial life in order — to save as much as possible, and build my 401(k) back to what it was. But I’m already struggling to stick to the budget I made for myself, and I haven’t saved at all this month. Part of it is that I put off some expenses while I was unemployed, so I made a couple of purchases once I got my first paycheck. But I also spent on some things that I didn’t really need to, just because I “could” — more expensive groceries, a couple of new shirts for Zoom meetings. Those are things that I used to buy regularly before I lost my job, and I need to change those habits. But I’m frustrated that I’ve already fallen off the wagon, especially since I have zero cushion right now and really need to be careful. How can I get back on track?

Congratulations on the new job, no matter what it is. You’re back on your feet; that’s the hardest and most important step. And it’s understandable that you’re a little wobbly in the budgeting department right now. So you blew your first paycheck after months of subsisting on fear and dwindling unemployment checks! I hope you’ve gotten to enjoy a nice meal or two. Don’t freak out about it.

However, I agree that it’s wise to start saving again, especially since you’ve recently experienced the anxiety of being broke. But you also need to change your approach. It’s one thing to restrict your spending because you have to; it’s another thing to tell yourself you should and then feel guilty when you don’t.

The “should” part is where most people get in trouble, says B.J. Fogg, a behavioral scientist who runs the Behavior Design Lab at Stanford University. “The habits that are easiest to form are the ones you actually want to do,” he explains. “If your goal is to restrict buying, that falls more into the ‘should’ category, and it’s going to be very difficult to maintain that. It’s better to be open to a broader set of behaviors, not just, ‘I have to stick to my budget and use discipline.’”

For starters, Fogg recommends taking discipline out of the equation by automating as much as possible. This is common advice for a reason: It works. Many companies allow you to automatically withhold money from each paycheck for a 401(k) or IRA because you’re more likely to keep it up. (If your new employer offers this option, definitely take advantage of it.) The same goes for your emergency fund. I personally automate a monthly transfer from my checking account to my savings so that I don’t have to think about it. These sort of “set it and forget it” patterns are your friends, Fogg says. There are apps that will automate your savings, too, like Digit and Qapital.

Of course, automating will only take you so far; you want to make active changes in your spending, too. According to Fogg’s research, people are more likely to maintain new habits when they keep them small and manageable. (He calls this the “Tiny Habits” method, and has written a whole book about it.) While it may seem better to aim high, especially when starting a new year or a new job, Fogg has found that people who do so tend to get overwhelmed and discouraged and then give up. But if you set incremental goals that you can meet easily, you’ll stick with the program.

So, for your first step, Fogg recommends pinpointing a realistic aspiration, like saving $500 in the next couple of months. From there, make a list of behaviors (again, keep them small) that will bring you closer to that goal. You don’t need to adopt all of them — you’re just brainstorming for now. They also don’t need to be habits; some of them can be one-time actions. For example, maybe you could make a little extra money by tutoring online or working overtime hours. Or you could review all your expenses once a week in order to weed out extraneous subscriptions and/or evaluate what you could cut in the future. Or, if you want to buy something online, you could write it down and set it aside for a full day before you decide whether to purchase it.

Aim for around 20 different options, says Fogg, and then go through them and pick a few that seem the most attractive and doable. These are what he calls your “golden behaviors,” because they turn into gold! Just kidding; he calls them that because they will be the easiest for you to adapt to, so they won’t feel like a chore that you want to avoid. Another tip: To put these goals into practice, Fogg advises piggybacking them onto things you already do. For instance, if you make coffee every morning, you could make a habit of looking for side gigs online for five minutes while you’re waiting for it to brew.

Different methods of saving money work for different people, so it’s important to give yourself some wiggle room. If something isn’t working, don’t beat yourself up; try breaking it down into smaller steps or moving on to a different tactic on your list.

What’s more, just because you’re “starting over” doesn’t mean you’re beginning completely  from scratch. It sounds like you’ve lived within your means in the past, so you must have a basic idea of budgeting. What has helped you before? Did you have budgeting tools or other habits that worked? You’re not reinventing the wheel here, just tweaking it to roll with your new circumstances.

Another good reason to keep your goals small is that you’ll give yourself the satisfaction of meeting them frequently, says Anastasia Locklin, a licensed marriage and family therapist based in California. “Our brain typically values immediate gratification more than future gratification, because we want to feel good now,” she explains. “But if you can see progress early and often, that’s gratification in itself, and it’ll motivate you to keep going.”

It also helps to anticipate pain points before they happen, says Locklin. Everybody’s different, but you know yourself best — what are some tripwires that are going to make it difficult for you to stay on track? (For me personally, Friday afternoons are a minefield — I’m always tired, ready for the weekend, and in the mood to treat myself. To head off random splurges, I try to schedule a walk with a friend or something else to look forward to around 5 or 6 p.m. It doesn’t always work perfectly, but it usually helps distract me from doing something I’ll later regret.)

Locklin also recommends enlisting one or more people you trust to hold you accountable. “My colleagues and I have accountability meetings every month, where we identify what we want to work on and help each other decide what’s realistic,” she says. You don’t necessarily need to hold meetings, but try to check in regularly — it’s best if your accountability partners are people who know you well and can tell you if they think you’re running yourself ragged. They should also be able to help you identify potential pain points and act as your support system when issues arise.

And, finally, these supporters should be there for you in the moments when you fall short and feel guilty. “Every person is motivated differently,” says Locklin. “A good accountability group will help you understand your motivations and celebrate them with you.”

I Already Blew My Budget. How Can I Get Back on Track?