How to Stop Hating Yourself About Money and Actually Make Positive Changes
Bad money management leads to money guilt, which leads to more bad money management.
More specifically, this is because money guilt can lead you to avoid thinking about or addressing the scenarios that make you feel guilty. You might budget less, or find yourself nervous to look at your checking account or open your bank statements. You engage in these behaviors to avoid the anxiety and guilt you experience when trying to improve in these areas. (See also: Your Money Worries Are Holding You Back)
This cycle is known as avoidance coping, and it has to stop.
Instead of staying trapped in a guilt and shame cycle, we need to make intentional changes in the way we handle our money and the way we deal with the guilt that ensues after we inevitably make mistakes.
1. Make Saving Manageable With Small Contributions
Budgeting and saving isn't about being able to put large sums of money into your savings account all at once. It's being intentional and calculated about what you're spending so that you allow yourself to put modest and manageable sums of money away for retirement or whatever else you might want to save for. People get hung up because they think they need to put a lot away at once. This often leads to failure, which then results in money guilt and giving up.
Instead, budget and give yourself plenty of room with your savings. Go with a small amount; something you're certain won't be difficult for you to manage. Over time those small amounts add up and can change as your income changes.
2. Include a "Fun" or "Misc" Category in Your Budget
You can use one of the "other" categories in Dave Ramsey's budget forms to allow yourself money for a "fun" budget item. This part of your budget is essentially a cushion that can be spent on whatever you want. If you mess up and buy a coffee or go to the movies when you didn't plan on it, deduct it from this section of your budget so that you don't feel like you've broken your financial plan for the week. Make sure you allot a reasonable amount, because assuming you spend all of the fun budget, it shouldn't drain your account. Reasonable is determined by your income, but generally, it shouldn't be more than 10% of your take-home pay.
3. Prioritize Fixed Expenses and Set Them on Auto-Pay
Some expenses are the same month in and month out. These are usually bills like electricity, your rent, mortgage, car payments, and whatever else you know you'll have to pay. When these are missed or late, you get notices which can be uniquely scary and demoralizing. Prioritize them first on your budget and make sure that they get paid early, every month. If the service offers an auto-bill pay or a similar feature that automatically drafts the money from your account, set that up so that you'll get in the habit of having the money there every month before it's due.
4. Assume an Imperfect Process
Making positive changes to your personal financial situation takes time, and it's almost never a smooth road. Recognizing this up front and expecting to make mistakes will help to minimize the guilt that you might feel when you fail to stick to your list of best practices. If you know that this is part of the journey, you're more likely to resist the temptation to backtrack and ignore the process altogether. So assume that you'll run into some snags along the way. When you do, just get back up and stick to your original plan.
Practical Tips for Initially Getting Out of a Money Guilt Rut
The most difficult part of the process can often be in the initial stages when you're trying to change habits and get away from feeling bad about how you handle your money.
In that stage there are a few initial things you can do that will help you get your plan jump started.
1. Avoid Taking on More Debt
If you have debt that needs to be paid off, it can be part of your budgeting and planning. What you want to avoid completely is incurring any new debt while you're trying to make good habits.
2. Cut Your Dining and Entertainment Budget
If you do make a "fun" or "misc" budget, it might be wise to bundle entertainment, dining, and all other unnecessary expenses into that category, at least until you get into the swing of being able to budget and save.
3. Make Saving Automatic
Setting up an automatic, weekly transfer from your checking to savings accounts makes contributing to your savings more of an inevitable bill than an optional transaction. Set this up with a small amount that won't stress your cash flow and let it draft every week. As you pay down debt and regain control, up your contribution to savings.
Stick With It
Once you start on a path of good money management and you stay on course, weeks and months turn into years, and before you know it you've been managing money well, developing good habits, and increasing your cash flow and savings. At that point it becomes part of your life and begins to happen naturally. And best of all, you've escaped the trap of guilt-shame-avoidance.
What about you? How do you avoid the cycle of money guilt and frustration? What are some of your best practices?