It’s A Money ™: Good vs. Bad Spending

Use Psychology to Build a Budget You’ll Stick With:
If you’re waging an inner battle of good vs. bad every time you whip out your credit card or peek at your monthly bank statement, it’s probably time to give your views on budgeting a shake-up. Start by losing the desire to classify everything as “good” and “bad.” There are good and bad ways to spend money, just as there are good and bad ways to save it. Following that logic, there are good and bad ways to budget. A good budget is one that, quite simply, works for you. Successful budgeting systems vary wildly in their approach and in the tools you need, but they tend to have the same three actions as building blocks:

PRIORITIZE • TRACK • REWARD

These building blocks not only help you organize your finances, but they also have the ability to boost your motivation (and there’s real science to back that up).

PRIORITIZE
What it means: Prioritizing your goals means taking a little personal reflection time and writing a few things down. Prioritizing your goals should not be confused with categorizing your expenses. We’re not even talking about what you think you “should” be saving up for. We’re talking about what you want your life to look like over the next few years. Is it your dream to train for a new career? To have an adventure in a foreign country? To throw an awesome wedding? To start your own business? To raise a family? Allow your goals to be a judgment-free zone—goals and dreams are as diverse as the minds and personalities behind them. In most cases, goals reach beyond the familiar trifecta of “pay off student loans, buy a house, save for retirement.”

Why it works: Prioritizing your goals gets you buzzing about what your money can do for you. There are a couple of motivating factors at work here. Number one: by prioritizing your goals, you are asserting your beliefs and your values. You are also reminding yourself of why you’re willing to adopt a budgeting system in the first place. Studies show that you’re more invested in activities that you see value in, and including your personal values in your budgeting system is what generates determination and stamina. Creating and sticking to a new routine is a pain if you think you have to or you should do it; it’s a lot easier if you’re mindful of why you want to do it. Number two: prioritizing your goals is a great starting point because it reminds you that you’re in charge. You have a say in where your money goes. Your budget is a collection of choices you make in order to create the life you want.

Get started: Grab a pencil and paper. Ask yourself what you want. Think about it for 10 minutes. Write the answers down. Realize they are achievable.

TRACK
What it means: Tracking your expenses means being aware of where your money is going as you spend it. Some prefer good ol’ pencil and paper, others swear by budgeting apps and spreadsheets, and some push more unique approaches like portioning your spending money into envelopes. The good news is that it doesn’t really matter how you go about doing it, but just that you do it. When you track your expenses, a couple of things come to light right away. You start to realize that every transaction, no matter how big or how small, is either contributing to a goal or taking away from it. There’s no such thing as “buying a pumpkin spice latte just because.” You will soon see that the cost of your fancy coffee comes out of somewhere—ideally out of your budgeted spending money, but potentially out of your vacation fund or your groceries or your student loan repayment plan. The second thing you’ll notice is that the longer you’ve been tracking your expenses, the more you’ll see evidence of your progress.

Why it works: As it turns out, we thrive on being reminded that we’re improving. On the surface level, tracking your expenses helps you to identify your spending patterns and to course-correct when necessary. More importantly, by tracking your spending, you’re also tracking your efforts. You’re creating a record of your progress along with a record of your transactions. Before long, you’ll have tangible evidence of how your actions and your follow-

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