We’ve all done it. When reviewing your credit card statement you get that sinking feeling in your stomach and you ask yourself, “How did I spend that much money?” It also happens while going over your budget, and you realize that your savings rate is not as high as you would like. You ponder, “Why didn’t I save more money?”
These feelings and questions about money are natural. It’s okay to spend money. However, if you feel guilty about your spending decisions, it’s time to examine why you feel this way.
Building Awareness
How do you pay attention to your spending? Everyone is unique and has different experiences with money. For example, your approach may not be the same as someone close to you – a parent, partner, or best friend.
Furthermore, there is a lot of value in advancing your money awareness, knowing how you spend, and acknowledging if it is aligned with your values. Here are some budgeting ideas to consider to help you build awareness.
Spending Approaches
First is the Spartan Approach. Set up automatic savings from your paycheck that immediately go into your appropriate accounts – 401(k), Investment Account, Savings Account, Emergency Fund, etc. Do what you would like with the remaining money. Then review your statements to see where it’s going.
Second is the Split Approach. It’s a more detailed version of the Spartan. Set up different buckets for the following categories: 401(k), Investments, Savings, Emergency Fund, Bills, Everyday Spending, Fun Savings (for things like travel and adventure), and Responsible Savings (for home repairs and taxes), etc. This gives you a more detailed account where your money is going.
The Final Approach is the Budget Nerd. You save all of your account statements and receipts and put all of the information into a spreadsheet. This is a very detailed and time-consuming approach to budgeting, and it works for many people.
Your approach can be one of the three ways mentioned or somewhere in between. You can choose a method that is best for you to better understand how you feel about spending.
Once you build awareness and know where you are spending money, you can do an assessment. How do your behaviors align with what you want? If these two are not congruent, you may want to consider working with a professional financial planner.
If you have questions regarding feelings about money, emotions around spending, or thoughts on budgeting, you can set up a free consultation.