good vs. bad spending...bad investments spending is bad no, buy buy my my book book spending is good...
TRANSCRIPT
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Good vs. BadSPENDING
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Use psychology to
you’ll stick with!BUILD A BUDGET
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Bad investments
Spending is bad
No, buy my bookBuy my
book
Spending is good
Saving is bad
Good debt Saving
is good
When you start looking for financial advice, experts will share their take on what’s “good” and what’s “bad,” but they will often contradict each other.
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I T ’ S T I M E T O
RETHINK
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Notes
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Rather than trying to follow all of the expert advice, start by losing the desire to classify everything as “good” and “bad.” Instead, just remember these three steps.
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S T E P 1
PRIORITIZE
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STEP 1 PRIORITIZE
Prioritizing your goals means taking a little personal reflection time and
writing a few things down.
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STEP 1 PRIORITIZE
What do you want your life to look like over the next few years?
It could be your dream to train for a new career, have an adventure in a foreign country, start your own
business or raise a family
Prioritizing your goals should not be confused with categorizing
your expenses
You shouldn’t prioritize what you think you “should” be saving up for—do not let other people’s
priorities define your goals
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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.”
STEP 1 PRIORITIZE
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W H Y P R I O R I T I Z I N G W O R K S
Prioritizing your goals gets you buzzing about what your money can do for you.
There are a couple of motivating factors at work here.
STEP 1 PRIORITIZE
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You are asserting your beliefs and your values
You are 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 reflect
your personal values —this is what generates stamina and
determination
It reminds you that you’re in charge—that you have a say
in where your money goes
Social scientists point to autonomy as being a critical element to
sustain motivation
It’s powerful to realize that your budget is a collection of choices you make in order to
create the life you want
1 2
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Grab a pencil and
paper
Ask yourself what you
want
Think about it for 10
minutes
Write the answers
down
Realize your
goals are achievable
G E T S T A R T E D
STEP 1 PRIORITIZE
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S T E P 2
TRACK
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STEP 2 TRACK
Tracking your expenses means being aware of where your money
is going as you spend it.
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Others like to use budgeting apps on their smartphone
or spreadsheets on their computer
Some gravitate to unique approaches like portioning their
spending money into envelopes
Some swear by tracking their
expenses with good ol’ pencil and paper
APPS ENVELOPESPAPER
I T ’ S T O T A L L Y U P T O Y O U
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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
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
When you track your expenses, a couple of things will come to light.
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W H Y T R A C K I N G W O R K S
Another critical element in sustaining motivation is competence, or your ability to do something well.
We thrive on being reminded that we’re improving.
STEP 2 TRACK
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Tracking your expenses helps you to identify your spending patterns and to course-correct when necessary
By tracking your spending, you’re also tracking your effort—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-through are contributing
to a calmer, happier financial life
You’ll see how capable you are of budgeting and you’ll find it easier to keep your budgeting winning streak going
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Try out a new budgeting
system today
Browse the App Store
or the web, or pick up
a book
Don’t spend much time comparing budgeting
approaches
Just pick one and try
it out
G E T S T A R T E D
STEP 2 TRACK
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S T E P 3
REWARD
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STEP 3 REWARD
Rewarding yourself means encouraging and celebrating your progress as you
create healthier financial habits.
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Time-based Use budgeting app every
day for 30 days
Achievement-basedPay off all credit card debt
Increment-basedEmergency fund reaches $500, $1,000, $2,000
Material rewardsFancy coffee, movie night,
new gadget
Time- and experience- based rewards
Give yourself permission to spend an entire day
just vegging out
M I L E S T O N E S R E W A R D S
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W H Y R E W A R D I N G W O R K S
Quite simply, rewards feel good. Rewards highlight our achievements and renew our commitment.
STEP 3 REWARD
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As kids, we loved earning those gold star stickers
Although that familiar achievement/reward structure
practically disappears in later years, it doesn’t mean that rewards are any less effective in adulthood
Assigning rewards to a milestone creates added incentive and
boosts your motivation
When you earn, claim and enjoy a reward, your brain gets an extra hit of dopamine, which increases your
focus and drive
1 2
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Brainstorm a list of budgeting
milestones and a list of possible
rewards
Set a timer for 10 minutes to keep yourself
on track
After the time is up, assign the rewards to your
milestones
Rewards should celebrate your efforts and be
exciting to work toward
G E T S T A R T E D
When you reach your milestones, claim your rewards!
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Incorporating Prioritize, Track, Reward into your budgeting method of choice will boost your motivation while tackling your personal finance goals at the same time.
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Sources: Forbes.com, ScientificAmerican.com and Time.com
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