11 Feb 2010

What Budgeting can Learn from Dieting

Getting spending under control has something very similar to loosing weight. Spending money gives us a "good mood" kick as a piece of chocolate does too. As with dieting - budgeting is all about helping spend less than you earn (eat less than you normally would), it's about identifying why you overspend (overeat), what triggers your behaviour and what to do about it.
One of the major success factors for long term weight loss is the ability to stay motivated. Budgeting and financial self-control over the long period of time requires motivation too. All too often people set goals and feel really energised for a while before abandoning them.

What happened?

In quite a few cases the decision to start saving, to get control over spending, to combat debt comes from a particular event, from something unpleasant (credit card declined, loan refused, etc.) This negative event triggers our wish to do something about it, to get far away from this uncomfortable place.

We start looking into options, read about other people's techniques, research what professionals have to offer. We make some choices and set goals (reduce debt, pay off credit card in full, start an emergency fund …. Loose 10 kilos, get into the summer dress from for two years ago, do at least three sessions a week in a gym) … After adhering to the new routine for a while we start allowing ourselves to overstep self-inflicted boundaries on occasions like Christmas and summer holidays.
Slowly we start spending more, saving less and credit cards get used more and more often (a chocolate cake here, a bottle of wine there, and than there is Christmas and other social occasions where eating is part of the ritual).

Away Motivation

What kept us going so far was a so called AWAY motivation. The reason it is able to motivate is not because of the possibility of getting something, but rather due to the prospect of avoiding something.

Getting out of debt is a typical away motivation. Once we start getting further and further away from the unpleasant place of being highly in debt, the pressure for change start to ease and our habits may return.

What do you need to stay on track?

Towards Motivation

You need to complement your away goal with a towards to one.Moving toward motivation is, as the name suggests, motivation from desiring to move toward, obtain or achieve something. When you give out rewards or incentives for doing something, it is using moving toward motivation. This type of motivation is all about pleasure. To BUY a house, to receive a monthly pension of a certain amount, etc.

In our example the goal of getting out of debt needs a "bolt on" of a toward motivation… "and with the money I won't need to pay towards my debt I can than save for a better house, more pension, a debt free holiday"

The more debt you repay the closer to your dream holiday you get - once the pain of being in debt stops hurting the pleasure of a great holiday takes over.

Read more about budgeting:
Emergency Fund and Why You Don't Need One
Which Budget Personality Are You?

image by loiclemeur

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Anonymous said...

well said...I really like this post.

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