If you’ve tried budgeting and failed, you’re not alone. I tried budgeting for years without success. Being a bad budgeter always made me feel like a financial failure until I realized that the problem wasn’t me. It was all of the extreme budgeting advice that’s pushed by the finance industry, especially to women.
According to research from Starling Bank, 90% of money articles in women’s magazines suggest that we should spend less. We’re constantly bombarded with messaging that buying shoes, handbags, and makeup are frivolous and the cause of our financial woes. Because of this, we unconsciously develop the idea that any feminine purchase we make is irresponsible.
I’m thrilled to tell you that all of the men who write the financial advice that tells you your purchases are dumb, buy dumb shit too. TVs, sports tickets, gaming consoles, sports cars, I could go on and on. But we rarely see advice shaming men for these purchases.
If you’ve been discouraged about money because you feel like you can’t cut back on “frivolous” spending and your budget always fails, it’s not you. It’s bad budgeting advice and money shame from the finance industry. Here’s how to fix both so you can slay your budget and buy the shoes guilt-free.
What Budgeting Means
Budgeting means that you allocate a certain amount of money to a certain spending category over a specific time frame. To create a working budget, you need to understand your spending and set achievable limits for each spending category. For example, let’s say you typically spend $400/month on groceries. A good budget would allocate $400 to groceries. Not more or less.
Where people get stuck is that they think they need to cut back their spending once they start budgeting so they can try to save more money. The first categories to get cut are usually things that are wants and not needs.
The thinking behind this type of budgeting is similar to diets like Keto or Adkins that cut out carbohydrates almost completely. While you may drop some weight, or in this case save some money, very quickly, it’s also nearly impossible to stick to this restrictive lifestyle long term. Inevitably, you’ll end up binging on the items you’ve restricted and go back to your old habits after a couple of months.
To avoid yo-yo budgeting, start by just tracking your spending for a few months. You may come across subscriptions you forgot you had and be able to cancel those for some immediate savings. You’ll probably also find that your spending varies from month to month depending on what’s happening in your life. Maybe your friend got married so you spent extra money going on her bachelorette trip and to get her a nice wedding gift. Maybe it was your mom’s birthday so you bought her a gift and took her to a nice dinner. Maybe you got a flat tire so you had to buy 4 new ones. Oftentimes it isn’t the $50 pair of shoes we bought that puts us over budget but rather other one-time expenses that get in our way. There are two ways to help smooth out these expenses so you can stick to your budget.
Create An Emergency Fund
The best way to stay on budget when emergencies pop up is to create an emergency fund. These savings accounts typically have 3-6 months of expenses saved in them to cover unexpected expenses or to keep your life stable if you lose your job. Having to buy 4 new tires unexpectedly in our example above is a perfect use of your emergency fund.
The most difficult part of building your emergency fund is knowing how much you should have saved in it. 3-6 months of spending is a wide gap considering if you decide to save 6 months you’ll have to save twice as much money, which will take you twice as much time. To help you determine how many months of savings is right for your lifestyle, check out my savings amount calculator. It takes into consideration how financially risky your lifestyle is and recommends a number of months of savings for you.
Once you know your emergency fund savings goal, you’ll need to set up a high yield savings account (HYSA) and start saving. HYSAs are savings accounts that pay you more than traditional savings accounts for keeping your money in them. Once you have your savings goal and HYSA, determine how long you want it to take you to reach your goal and how frequently you plan on making contributions. Do you plan on making monthly contributions and want to have your emergency savings fully funded in a year? Divide your goal by 12 to get your monthly savings rate. Then automate your contributions into your savings account so the money flows straight from your checking to your HYSA without having to think about it.
Create Sinking Funds
Once you have an emergency fund saved, then you’ll need to save for other one-off expenses like your friend’s wedding, your summer vacation, or buying a new car in a few years. An easy way to do this is to use sinking funds.
Sinking funds are smaller savings buckets you fill gradually and then sink back down to zero once you reach your goal. For example, let’s say you want to go on vacation next summer and you think your vacation will cost $5,000. If you have 12 months before your vacation, you can divide your vacation savings goal by 12 months and start saving monthly toward your goal. That means to hit your goal you’ll need to save about $420 each month. Then when your vacation comes around, you can use all $5,000 in your sinking fund to enjoy your vacation and stay on budget.
Sinking funds can be really helpful when trying to stick to a budget because you have extra money available to use for one-time expenses that won’t cloud your budget. If in general you spend about $500/month on food but take your mom out to a $200 dinner for her birthday, you may feel discouraged if you go over budget that month. If instead, you have a sinking fund of $300 allotted to your mom’s birthday gift and dinner every year, you can give your mom an amazing birthday experience without having to decide whether to restrict your other food consumption that month or accept that you’re going to be over budget.
An easy way to keep track of your emergency savings and sinking funds is to use Ally Bank. They have a HYSA that you can easily create buckets in for different savings goals. This feature means you only have to open one account and can manage all of your savings buckets in one place.
Stop Restricting Your “Frivolous” Spending
Once you understand your spending habits, have an emergency fund saved, and are saving in sinking funds, you do not need to continue to restrict your spending. This is one of the biggest mistakes people make when trying to budget.
If you spend $800 going out to restaurants every month, other people may find this absurd. But if you love trying new foods and going out to fancy dinners, who cares! Maybe your friend who thinks your love of food is over the top has a love of fashion and spends $800/month on new clothes. If you don’t care about staying up on all of the latest trends, this may sound ridiculous to you. The important thing in this scenario is that each of you is spending money on the things you love, not that you aren’t spending your money the same way.
The only requirement for being good with your money is to spend less than you make. After that, an emergency savings will create more financial stability, sinking funds will help you stay on budget, and investing will build your wealth. All of your remaining money should be used as a tool to enjoy the things you want to in life. There’s no need to keep spending less and less on things that aren’t absolutely necessary. If you want the shoes and you have the money for the shoes. Buy the fucking shoes.