How to Take Control of Your Money: It Sounds Boring but It’s Actually Liberating

Many of us treat our bank accounts like the tide. Money comes in, it eventually goes out, and we don’t give it much thought beyond that. Until a financial tsunami hits in the form of a redundancy, an illness, divorce, or mounting debt that forces us to confront our spending patterns. These days, it’s less likely to be a major event, but the combined effects of rocketing power bills, inflation, and the ongoing cost-of-living crisis have us feeling like we need to know where our money is going and where we can save some of it.

Budgeting is one of those things we know we should do but end up avoiding because it seems too hard, too boring, or just plain miserable. “Make a budget and stick to it” is common enough financial advice, but the problem is where do you start if the word budget makes you cringe?

1. Making a budget is about freedom, not restriction

For many of us, the first hurdle to making a budget is our resistance to the term. Budgeting feels like a punishment, like something that has to be done only when things go bad. We have failed to manage our spending or make enough money, and now we have to cut out the fun things as a consequence. In reality, it’s less about restriction and more about freedom by finding out where your cash is going and redirecting it towards helping you do things you’d like to do.

Like buying a house or having enough money to quit your job and start a business or travel for six months. It’s about future planning. By seeing the new budget as a way of enhancing their life quality instead of reducing it, financial influencer and author Caz Mooney’s family, who embarked on what she calls a “low-spend” year, was able to remain united on the budget.

2. Knowing is half the battle

The second hurdle between many of us and financial empowerment is taking a good hard look at what we actually spend. We usually know how much is coming in because it’s easy to look over payslips and invoices, but it’s a lot less fun going back over credit and debit card statements.

Seeing just how much overdraft fees, late payment fines, and parking tickets have cost us is self-esteem napalm. We don’t want to see how much we have spent on takeaways, nights out, or other things often seen as a waste because of the anticipated shame we feel.

In 2019, researchers from Harvard Business School and Columbia Business School examined the relationship between shame and financial hardship. They knew people in financial difficulty often felt shame, but they wanted to investigate if this led to people making worse financial decisions – a financial shame spiral.

They concluded that “feelings of shame can fuel counterproductive financial decisions through increased behavioural disengagement”. Meaning if someone was more likely to feel shame about their financial state, they were more likely to avoid financial information (such as checking their bank balance or credit card statement). This meant the more likely they were to make financial decisions that would make things worse.

Related Facts

• According to a report by the Australian Securities and Investments Commission, only 1 in 4 Australians have a budget.
• 76% of Americans are living paycheck to paycheck, according to a 2019 survey conducted by CareerBuilder.
• In the UK, a study by national charity Mencap found that 70% of people with a learning disability have no savings.

Key Takeaway

Budgeting is essentially taking control of your money. By doing so, you’ll know where your cash is going and the areas in which you can save. A budget provides a clearer perspective on spending habits and is a powerful tool for financial empowerment. Learning to take control of your money is a life skill that can ultimately free you from the stress of living paycheck to paycheck and allow you to achieve the things you really value in life.

Conclusion

Taking control of your money doesn’t have to be a daunting task. It can be a liberating experience by providing direction and a sense of empowerment. By creating and sticking to a budget, you’ll have the confidence to make informed financial decisions, achieve your future goals, and ultimately free yourself from financial stress.