This video post is by staff writer Adam Baker. Baker previously featured a post on his own blog entitled, 42 Ways to Radically Simplify your Financial Life.
For many people, the process of personal finance cycles between intense motivation and devastating burnout. A life event, a powerful communicator, or maybe even a simple blog post creates an initial spark. Before we know it, we’re wound up and ready to pounce: We vow to finally get our finances in order.
We slash our restaurant budget to nothing. We research car-pooling options in our area and collect quotes on refinancing our mortgage. We start clipping coupons, cut out our spending vices, and craft fancy budgets with dozens of categories. Unfortunately, few battles in history have ever been won when waged on so many fronts. Our best intentions soon crumble to the inevitable. We become overwhelmed. Burnout creeps in, and few of our positive changes stick.
This was what happened consistently to Courtney and me several years ago. In the following video, I elaborate on the technique we employed to finally break this pattern and create positive change that lasted.
A brief summary of the video:
- The nature of excitement and change [0:35]
- Benefits of starting with a few, broad budgeting categories [1:00]
- Breaking down one broad category per month [2:00]
- Ensuring positive changes stick [2:50]
- Don’t forget to spend one month on increasing income! [3:49]
By budgeting with broad categories and focusing on only one per month, Courtney and I were finally able to maintain our motivation over a longer period of time. Our targeted focus gave us a deeper awareness of problem areas, and enabled us to retain the majority of our new habits.
Have you experienced success with a similar strategy? What other techniques have you used to maintain motivation and avoid burnout?
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This article is about Budgeting
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The process you’re describing worked really well for me when, for specific health reasons, I had to completely change my diet and stick to it.
But for financial matters the blitzkreig approach worked best for us when we had no money (buy nothing! only basics! don’t waste food! etc.). Now that we have money and put savings first we don’t need to focus on anything.
Though in August we are going to take a financial health day and try to better optimize our retirement plans (since before we satisficed and now I see the option I picked has among the highest fees) and while we’re at it, get a will and check out insurance rates since ours have been creeping up to what is likely above market levels the past few years. That’s also sort of a blitzkreig approach, but I figure that one day is better than nothing and then we can go back to not thinking about things for another few years.
Or maybe I should just wait until Tyler K posts and then say I agree with him…
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Thank you for the idea, Adam. This actually looks refreshingly sober compared to all the magical strategies to make you a billionaire and losing weight at the same time. Although I would mention that you may want to think about the money saved and what best to do with it. But I appreciate the “increasing income” month. Seems you have thought it through quite well!
I will definitely keep this idea in mind when talking to my own clients. Thanks!
- Lorne
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Transcripts for videos would be much appreciated. For a variety of well-known reasons, some of us can’t/won’t do audio and/or video online, so posting a simple transcript (either in the post itself or through a link) would make sure those people aren’t excluded from the content of the post.
Thanks for considering my pony request!
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Nicole, LOL – I agree. Better a day (or a few days) of concentrated effort and then a few years of coasting, than a system requiring constant attention and maintenance. Feh!
Re: keeping up motivations: paying off debt is and has been our primary objective for the past year. I had to lay out for DH exactly how much we were spending each month to service debt, how soon it could be paid off if we took X-Y-Z steps, and how much “disposable” income we could then have – to save, in our case, for a retirement residence – without working more.
He was a little shocked, I think. He hadn’t thought it was possible, but I showed him not only can we be debt free inside two years, we can have a big down-payment saved within five.
So when we get a little frustrated and burned-out with the less-self-indulgent lifestyle, I print out a photo of a house that’s for sale, within our projected price range, in the area we want to retire to, and say “We can have this!”
Seems silly, but it helps.
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I’m aware that some folks can’t (or won’t) watch the video. I’m pretty much anti-video post myself. (I don’t mind when video is used to support a post, but except for weekends, I’ve tried to shy away from video here.)
I’ve expressed my concerns to Adam, and our solution is to offer a written post that basically re-iterates the video content. It’s not a word-for-word transcript, but usually attempts to convey what Adam is getting out in the video.
We have three more of these scheduled for the month of July. At the end of the month, we’ll re-evaluate how they’re working.
Which is to say: Thanks for the feedback on this! It’s important for us to know if people like (or hate) the video posts, and what we can do to make them work better. Adam likes them, so if we can keep them, we will. But we’re not going to force them on folks.
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chacha– It really is amazing what is possible when you have a plan. Reading Your Money or Your Life was really eye opening for me… in the back of my mind I now know that if we’re really good we can actually move to California permanently and *not have to take jobs we hate* (which would be true if we moved right now), or otherwise suffer, within 10 years. We probably won’t be that good, but it is an actual possibility that really changes everything.
A down payment for a house out here would probably take quite a bit longer though. But I think with a plan we could do it too.
Also not crazy about video… not at work, anyway.
p.s. JD, can you send the sun back? We miss it. Thanks.
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“For many people, the process of personal finance cycles between intense motivation and devastating burnout. A life event, a powerful communicator, or maybe even a simple blog post creates an initial spark. Before we know it, we’re wound up…”
It’s not just personal finance. I feel that way about blogging, too. And lots of people do this with exercise, diets, etc.
-Erica
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Spending plans are something that I really struggle with. I do have bills that need to be paid every month and I have written down on my computer how much is needed to pay each bill each month.
But I don’t sit down and give myself strict budgets on every category because if I did that then that would just drive me crazy. I’ve realized with money I do need flexibility, and if I notice a trend in where my money is being blown I do try to cut back.
I noticed that most of my money has been going to eat out, so now I try to eat in for the most part. I do try to save I just dump everything into the savings account, if an emergency comes up I dip into my savings.
Emergencies are really rare for me so I feel fortunate.
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Thanks for the reply, J.D. I understand that the blog can’t be all things to all people – and you do a great job of maintaining quality and encouraging a good community.
I’ll just move on and look forward to the next old-school posts as the videos come up.
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btw I don’t mind video posts as long as they don’t go on forever, they can actually be refreshing from reading, and video posts have their own places
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I dislike the video format as well, if you are collecting votes.
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I think it depends on the type of person you are. Some people are just better about sticking it out than others. This type of approach would probably work especially well for someone who wants to develop good habits, whether it is personal finance related or otherwise.
For my wife and I, we both knew we wanted to have a budget from the time we got married. So we’ve never been in a position that we had to “get things under control” as it were. It is more a process of constant improvement and choosing what to focus on next, usually in regards to which debt we should pay off next.
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Thanks for the terrific blog! I just wanted to reiterate what some others have said – I’m not crazy about the videos.
I’m a reader and transcripts/summaries would be terrific. I just don’t watch the video posts.
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I don’t like video posts, especially if there isn’t a compelling reason for it being a video. Adam’s information was decent enough, but I could have read the same content in half the time it took to watch the video. Watching him sit there and talk added absolutely nothing.
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After reading through the comments I admit that I was a bit confused as to what the blog post was about. Seems that they were all about the format of the blog rather than the blog itself.
Regardless, your idea is refreshing. Nobody thinks of attacking their finances from very specific fronts. People tend to think of saving as much money as quickly as possible.
This way there will be less of a burden and they will be more keen on saving money.
Although I was never a huge fan of video posts (at work only) it was refreshing. Listening in on someone keeps me up and I was able to take in information at a different level. Thumbs up from me.
Cheers,
Wahid
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I vote against videos – what I love about blogs is that I can power read them: skip boring stuff, scan tag lines / head lines until I find something that piques my interest.
Transcripts help, but why bother …
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First, I like this post — I’m going to take Nicole’s advice and try to work it into diet!
Format-wise: I’d be good with a 1x/month video, from different authors. Just to keep it interesting and see a different side of the contributors. Obviously would be great if the video added something to the post — such as a tour of JD’s garden, a screencast of using an online money-management tool, or a one-on-one interview.
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As with others above, my goals were compelling enough that I never lost motivation back in the day when I more strictly budgeted. To do that, I just connected what I was spending with my goal – ie. that new pair of boots would cost me 3 days of retirement, that one week holiday would cost me a month of retirement – is it worth it? Sometimes it was, sometimes not. It must be a sustainable method for me because I still do it over 10 years after getting out of debt.
I went even simpler and went down to one big category of just discretionary spending. It worked for my varied lifestyle far better than more detailed categories.
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What a fantastic basic concept.
Hitler lost the second world war because he attacked Russia too soon. udervise ve vood all be speeking Deutsch now.
We employed the alternative massively effective budgetting tool.
Be a self employed Engineer for 15 years with take home pay of £50K a year and spend it all (and more besides, because ‘I want one of those NOW’) because ‘my jobs safe’.
Watch as the banks destroy the worlds finances.
Suddenly realise that over 90% of British industry is ultimately owned by Japanese investment banks, who suddenly have no money to fulfill their legal obligations to complete legislation driven improvment projects.
Watch as my £50K a year take home falls to ZERO.
Start a brand new business with Kleeneze (sorry not available in the USA) Which although it’s building really well is , after all, a business and needs time.
Suddenly HAVE to live on £18K a year GROSS.
Best Motivation for re-inventing your budget that anyone can have LOL.
We used to spend about £1,000 a month on groceries, now we spend around £300 a month, AND we eat more healthily.
Fortunately the finance on my car ended a month after our income disappeared saving us £375 a month.
We’ve sold my wifes’ car (THAT hurt) it was a really nice car, but it was costing us £489 a month in finance.
We’ve moved to a cheaper house saving us £400 a month in rent.
We’ve cancelled everything that wasn’t absolutely essential – including SKY and the TV license (It’s true, you don’t die if you turn the telly off!)
We still have creditors who we’re negotiating reduced payments and frozen interest with, but basically we are starting again from scratch.
We won’t fall into the credit trap again
Certainly not in the next six years or more ‘cos no-one in their right mind will give us credit now anyway!!
The one thing that keeps coming back to me though is
WHY aren’t our schools teaching kids how to budget? It’s a thousand times more important than even the basics.
Who cares if you can’t spell budgit if you can make one and stick to it.
It CAN’T be one of the things that are left to parents because nobody ever taught us!
Back to subject,
Your article is brilliant and if it helps one person (which I’m sure it already has) to get out or stay out of debt then you’ve done a service to humanity.
Keep it up &
we’ll see you
OVER the top
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Another vote for video transcripts. I don’t watch videos on the net due to lack of control over how fast and the order I consume the content.
Videos are simply too passive for me.
Maybe put up a survey or vote to get an idea of what the readers like?
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As for dealing with budget catagories, very early on I was overwelmed. I found that doing everything on paper first (not using the computer) forced me to keep it simple. I had to think about my major catagories and how to record varous expenses and income in a simple, clear manner so I was not spending huge amounts of time with the paperwork.
The use of the paper and pencil method really did force me to keep refining my budget into something I use, rather than something I pretend to use (like some people’s exercise equipment).
Later on I made budgeting into a game (analgous to role-playing games) and budgeting easy and fun now. But at first it was a pain as I did not know the ‘rules.’
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Another vote for non-video posts here. I think Adam is a compelling writer, I miss reading his stuff – here and at his own site.
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I vote no on the video posts. For one thing, it’s easier to skip around, backtrack, etc. Plus, I guess I just like reading better.
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Personal finance is about building habits, and to build habits you need to really work on them hard at first. Then it’s much easier and you focus on something else.
Imagine someone saying they were going to stop smoking AND jog everyday AND change their diet completely, etc, etc. There might be some people who can do that, but most people will need to focus on just one.
Just don’t fall into the trap of never bothering to check everything is right! You might end up in (more) debt simply because you didn’t check your account regularly, or another such small thing that doesn’t really take any effort.
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Count me on the side of preferring the written word, at least here.
In regards to the content, it’s a great idea. An opportunity to focus in a completely different manner is exciting!
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Another vote against video posts. I don’t see that they add any value, I think they actually subtract value since they require more of a reader’s time and resources.
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J.D., fwiw I don’t view video posts because I nearly always read GRS at work. And my speakers are on mute.
A cat video works fine without a soundtrack. PF advice, not so much.
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I live in a rural area where high speed internet is either non-existent or very expensive. Unfortunately, watching a video on a dial-up speed of 52 kbps just does not work. Perhaps offering the option to either view a video or read a transcript would enable those individuals with a specific preference or need to choose the option that works best for them.
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Another vote against video posts. I usually read at work, in the evening when I’m with my family, or at night while I’ve got the TV going – none of these work with watching a video. Aside from that, when I do listen I never like them. They talk too fast or slow for me, go into detail about things I don’t want or gloss over what I do want, etc.
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I don’t like video posts either. Reading = fast and exciting. Video = slow and boring.
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I really enjoyed watching this video format. I was able to watch it and write notes down while. Again I am reading this on a Sunday morning at home, so video is fine with me. I really liked your strategy. Keep it up!
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I really like your story. Creating budgets can seem so daunting for some, while others have no problem making a budget but have real issues sticking to the plan. Often I find that the hardest thing for people is creating a realistic budget. A while ago I wrote a blog about 7 Tips for Financial Success, I suggest that people collect all of their receipts for a specific period of time to see what their spending habits are really like. This will allow them to create a more accurate budget plan and set them on the road to success. This is one of my favourite habits that keeps me focused on my financial goals.
7 Tips for Financial success: http://jaynsteele.wordpress.com/2010/05/28/7-tips-for-financial-success/
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Great ideas…
It is very important to target specific areas to budget on. like groceries, car payments, eating out, etc. When you break it down and keep focused you can reduce your spending and begin moving to a positive cash flow.
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