How to Turn a Limited Budget Into Sustainable Good Money Habits

When people decide to improve their financial habits and start saving money, they are often motivated by a temporary monetary crisis. Maybe you’ve lost your job or faced unexpected bills, but after the crisis is over, how can you maintain your newfound sense of financial responsibility?

This post was originally published on The Simple Dollar .

Sarah and I hit rock bottom nearly ten years ago. We made difficult choices, started to change things, and these changes are still strong in our lives.

We still save the majority of our income – roughly half of it annually since 2012. We are still debt free. We are also not interested in changing our direction. We are happy with our day-to-day life (at least in terms of our costs … sometimes being a parent, working professional and active person in the community adds some stress).

At the same time, I know that many changes in life for people are just phases. Sometimes people try to change their lives for a while, but find that it is not suitable for them, for example, during a period when they exercise vigorously, and then gradually stop doing it. Other people use it to achieve a much shorter-term goal, such as someone who has been on a crazy diet for two months in order to gain some weight.

Financial improvement can be very similar to this. Maybe your financial goal is short term. Maybe you are programmed to dive into something for a while and then move on to something else that excites you.

Sounds familiar? You may have turned to financial improvements when you nearly lost your car or apartment and are trying to make some changes so that you are still a long way from returning to ownership. You may be trying to come up with a plan for how to buy a house. You may be just very excited about the financial changes right now, but you are knowledgeable enough about yourself to admit that this may be just a phase.

However, there is a good chance that the financial improvement that you believe so strongly in right now is just a stage that you will get tired of in a year or two and move on to something else.

And that’s okay.

However, the fear that many people have about this change is reasonable. They are afraid of simply losing all the progress they have made. This fear is not very different from the fear of a person who has made significant progress in dieting. They are afraid that when the time comes and they stop being so strict, they will lose their progress and return to their previous state, in which they were unhappy.

The same is probably true for many people who have hit financial bottom and are working hard to improve their situation. Once you stop being so hard on yourself, there will no doubt be an opportunity to find yourself in this situation again, and this is a pitiful place. You not only found yourself in this financial hole again, but you have grown older, and there are fewer years left between this moment and the pension with which you can dig up again.

What can a person do now to ensure that at least some of the positive benefits of the path to financial independence continue as the fire dies down and the center of your life shifts to something else? Here are six key things you can start doing right now, and they will be incredibly easy to maintain (or very difficult to get rid of) as your passions move in a different direction.

Automation, automation, automation

Many of the best financial steps you can take are automatic. After you set them up, the money is simply transferred from account to account, you don’t even need to lift a finger. It just happens and the money is safely saved.

Having this kind of automatic contributions is a great way to protect yourself from changing interests in life. It takes an effort to cancel an automatic plan, and when you think about it, you will probably retain enough knowledge about smart financial decisions and the positive life impact they can have so that you don’t have to bother canceling that automatic translation.

There are several possible ways to do this.

Set up an automatic contribution to your 401 (k) plan at work. Sign up for your 401 (k) plan and then make a healthy contribution straight from your paycheck. Make sure you contribute enough to get a complete match with the employer, and then just forget about it all for a long time.

Set up an automatic contribution to your own Roth IRA. If you’d rather be in control of the plan yourself, create a Roth Investment House IRA (I use Vanguard). It’s really simple – much like opening a savings account – and once the premium is automatically charged, it just grows quietly and steadily, pushing you towards a safe retirement.

Set up an automatic savings plan to continually replenish your funds in case of an emergency. Ask your bank to transfer a small amount from your checking account to your savings account on a weekly basis so that you have some contingency reserve.

Set up automatic contributions in 529 plans for your kids. If you have kids, it might be a good idea to put together a college savings plan for them. Just automatically deposit a small amount into this plan every month and they’ll have some money when it’s time to go to college.

Set up automatic savings for whatever life goals you may have. Are you saving up for a down payment? Replacement car? Moving around the country? Whatever your relatively short-term goal, you can also automate savings for it. You might find it easier to open an online savings account with a bank like Ally to do this, but once you do, you can easily automate your savings.

Set up an automatic investment in a taxable account for early retirement or career change. Maybe you just want to invest using a taxable account to achieve a goal in ten or fifteen years, such as a career change or starting a small business. In that case, open a taxable investment account (I’m using Vanguard again and it’s not much more difficult than opening a savings account) and fund it automatically.

Focus on improving your daily routine

People are creatures of habit. I’ve found that over and over again, when I firmly establish a daily routine that doesn’t require much extra time in my life and is simply the best replacement for an old routine, I tend to stick with that new routine forever. … If I start shopping at a new store and, for example, reach a point where I know where the items I regularly buy are, I will just keep buying from that store unless there is a good reason to switch again.

Use this period, when your passion for financial improvement is high, to find such models in your life and replace them with more financially responsible ones. Do these new things over and over and over until they become normal to you, in which case they become your new normal, and it will take effort to change it.

Here are some of these routines that you can implement.

Make the discounted grocery store your default grocery store. Start shopping at an inexpensive grocery store in your area where you can be sure that prices are pretty low. Shop there every time you get comfortable with the store and find where to find all your usual stuff. Once you do this, the store becomes your default shopping destination and you save money every time you shop there.

Make a cheap morning routine. If you stop for coffee every morning, figure out a rough approximation and save $ 3-4. Once you have a good daily routine, it will actually be faster to just cook it at home before you leave, and you will save a few dollars a day.

It is perfectly normal to take a container of leftover food. Make it a goal to take the remaining container with you to work every day. Do this for a month or two. In most cases, it will contain leftovers; sometimes it can be a sandwich or something you made yourself. Soon the habit of eating at your table or in the break room will become normal for you, and going out to eat out will become a big waste of time and money.

Invest in something that lowers costs

There are so many things you can invest time and money in right now that will consistently save you money down the road without any additional time investment. These are one-time improvements that reduce your ongoing energy, fuel and other costs.

The best time for this kind of improvement is now that you are really excited about the financial change. These steps may not seem so compelling later on, but if you do them now, you just might be able to get some savings from time to time.

Here are four of my favorite changes in this direction.

Install LED bulbs everywhere. LED bulbs are more expensive, but they last twenty times longer than conventional incandescent bulbs (and about ten times longer than CFLs) and consume about 20% more energy. LEDs will save you at least $ 100 over their lifespan over incandescent bulbs by reducing energy costs and eliminating the need for replacement. In our house, we have replaced almost all the light bulbs with LEDs, leaving incandescent bulbs only as backups.

Block up the windows. Applying sealant to the edges of the windows reduces the amount of air that can be generated by keeping warm air inside in winter and trapping it in summer. Both of these things can lower the cost of your electricity bill.

Install door hinges. Likewise, doorways reduce airflow along the bottom of doorways, keeping warm air inward in winter and warm air out in summer, which, again, saves on energy bills.

Buy an inexpensive cell phone. Look at low-cost providers and see if you can find a great plan that suits your needs at a lower cost than the cellular provider you are currently using. The switchover may be costly, but you will be able to recoup those costs pretty quickly with lower monthly bills.

Explore low cost and zero cost

We all have hobbies and interests, but many of them come with real costs. If you are into an expensive hobby like shopping for clothes or playing golf, you are essentially signing up for a constant drain on your finances.

Instead, use this time to explore new interests in your life that don’t require a constant flow of money.

As I went through this period, I rediscovered my passion for reading, not collecting books. I started going to the library every week, checking all kinds of books and just devouring them in my free time. This time came mainly from hobbies such as video games and card games, which were quite expensive.

If you are looking to get into low-cost activities, here are some good places to start.

Your local library. The library is not only a treasure trove of books, films, CDs and audiobooks, but is often a meeting place for many special interest groups. More information can be found on message boards and in the brochure section at your local library.

Meeting. Meetup is a great place to learn about groups in your area that meet to discuss, exchange ideas, and participate in a wide variety of events. Go there, view everything within 25 or 50 miles of your home, and check out some of the more interesting events.

State and national parks. Not only do the nearby state and national parks offer an endless array of things to visit, they also usually offer a range of programs that can direct your interest in nature. You can also check local parks and entertainment programs in your city.

Make new friendships that strengthen your good habits.

One of the best things about participating in new interests is that you tend to meet new people, and inevitably, if you keep doing these things, some of these new people will develop into new friends. Involving yourself in any activity simplifies this process, because you are already doing something that interests you both, so you already have something in common and something to talk about as a starting point.

For some people – and I’ll include myself in this – this social interaction is easier said than done. Introverts like me tend to form strong friendships and just stick to those relationships.

However, it is often the friendship that makes you spend more than you should. If you have friends who are into expensive hobbies or have expensive tastes, they often take you on a trip and make you spend too. As Jim Rohn put it, “You are, on average, of the five people you spend the most time with.”

If you can form strong new friendships, you will find that their lean outlook will also help you maintain a leaner mindset even after the novelty of your financial journey is gone. Here are some strategies for creating new friendships that have leaner views on them.

Participate in activities related to your common interests outside of the group. I participate in a couple of board game clubs in the area, but I started playing games with some of the members I interacted with in other contexts. We met at lunch to play quick card games, and we held events in people’s homes where we play games that are less fun for a large group.

Host dinner parties. Invite a few people over to your home and cook an inexpensive dinner for them. Sit down together, enjoy your meal, have fun conversations, and maybe do something simple like play a card or board game. This not only makes the evening fun, but also provides a great opportunity to get to know someone better and really start a friendship with them.

Offer free outdoor activities. Whatever is appropriate, whether it’s just a walk in the park, your kids gathering in the playground, playing soccer or frisbee frisbee, or just a picnic. As long as there is no prepayment for participation, it will be a fun way to spend time in the community.

Always keep this question in mind

Train yourself to be mindful of one question whenever you are even going to spend money. Every time you are about to open your wallet ask yourself:

What do I appreciate about this thing I am about to buy / make and is there a cheaper way to get the same or very similar value?

Quite often, the first part of this question baffles you. What exactly do you get from this purchase? Why do you even think about spending money on this?

There are many reasons why we buy, and when we allow ourselves to stop and look at these reasons, many of these reasons seem completely meaningless and silly. Are we really attracted to packaging? Are we buying this product because our friends are buying something? Are we doing this out of some weird sense of guilt that doesn’t make sense?

The worst thing is when you buy a product because you think it will cause some change in you. No purchase on earth will do this. Only you can change who you are.

The second part of the question often catches you in situations where you are spending too much money on something. Is there a way to get what you want out of this item without spending so much? If so, why don’t you follow this path?

This second part is often a shopping incentive. The truth is, very few purchases are important enough and urgent enough to be bought right now . Almost all purchases can wait a while, and when you wait a while, you give yourself the opportunity to shop at a better price.

Another benefit of waiting is that you get to find out if you really need to make that purchase. Will it really bring you real benefits in your life? Or is it just what you wanted at that moment?

Ask this question constantly . Continue until this question naturally arises in your heart every time you make a purchase, even every time you pick up an item at the grocery store. When it comes naturally and you listen to the question in a truly natural way, you have a tool that will serve you no matter where your path goes.

Final thoughts

The full path to financial independence is not the path that everyone will take. For some people, these initial steps – those that address the immediate problem – will be enough to meet their needs. For others, financial independence may seem fun at first, but the excitement will subside over time.

No matter where you are on your journey, the tools outlined above will help you. They will set you up for continued success, even when the excitement of financial progress begins to wane, and your life focus shifts to another place.

After all, just because your hobbies are changing doesn’t mean you can’t keep going on a positive financial path. Just because there are other things in your heart and mind right now does not mean that you cannot spend less than you earn and save for the future.

Good luck!

When Financial Improvement Is Just a Phase | Simple dollar


Leave a Reply