if you are like most you started the year off with a list of “Resolutions”. You probably started the year by saying to yourself “This will be the year I finally erase all my debt.” But now that spring is already here, how have you done with sticking with your financial resolutions? With almost 88% of all New Year’s Resolutions failing, sticking to your budget may be harder than you think. The reason? Our brain is wired to do the same thing year in, and year out, therefore making it very hard to actually change the behaviors that got you into debt.
Here are some Tips to help you understand your debt behaviors, as well as tools to help you combat the temptations of spending.
We all tend to overestimate our own willpower and self-control when we set resolutions. We REALLY believe that for whatever reason THIS YEAR will be the year “I stick to it”. Planning to be virtuous is easy and it feels achievable. Actually avoiding temptations is much more difficult.
- Be realistic with your reaction to temptations.
- Give yourself room to re-adjust the budget if the original plan isnt feasable.
Our brains discount future consequences for ourselves when we want instant gratification. How many times have you eaten a calorie laden meal right before you started your big diet? That is because our brain is saying “go ahead, eat the cake…those calories are for that person starting a diet tomorrow”, it almost makes you feel like that is a different person, therefore not recognizing the consequences for yourself right then and there.
- Take the decision-making out of your own hands.
- Set up your paycheck so a portion automatically goes into savings without you ever seeing it and being tempted to spend it instead of save it.
- Keep credit cards at home—this completely eliminates those impulse buys
Credit card spending doesn’t feel as “REAL” as spending cash. When we pay with cash, we feel the pain of losing the money immediately, but paying with a credit card delays the sense of pain until the bill comes. And because we pay our credit card bills electronically, there is a further sense of unreality to the amount of money you owe. The further you get away from cash transactions, whether that is in the initial point of purchase or in the bill paying, the less likely you are to feel the pain and urgency of your debt.
- Start paying with cash instead of credit
- Disperse your monthly “allowance” into envelopes of cash. As long as you have money in the “shoe envelope” you can buy shoes. If it’s empty, you got to wait until next month—even if they are on sale!
These strategies will help you change your behavior habits, by giving yourself time to actually think about your spending habits. By understanding WHY you spend, you can begin to develop the discipline necessary to pay off your debt.