Creating a financial diet
What is a financial diet? Why is it important? How do I use this to change my system?
Today we will cover all these questions. Now there are many books and post that tell you how to better manage your finances or how to create the kind of lifestyle you want. The financial diet on the other hand helps us see how we are spending, why we are spending and ways to fix unwanted habits.
Have you ever created the perfect budget, but no matter what you do the money never seems to add up? Over or underspending can affect our budgets in many ways. That extra take out for the month could have meant extra savings or finding that special could have helped you buy extra food for the month. The financial diet helps us find our systems. Goals and systems have been at war for all of time. A lot of people focus on goals and disregard the system. If we keep putting the same input in then we will always get the same result. The only way to change the result is to change the system.
Let’s look at what a financial diet is.
A diet usually means no eating or eating a limited amount of food. Ever wondered why your diets don’t work? Diets create a scarcity mentality which makes your brain think it will not have again, therefore triggering the response of wanting food all the time. Once you eat your reward system is activated and you find pleasure in eating and cue the constant struggle. The same would be for money, if you keep spending as if you have no money then when you do spend your brain rewards you and so the cycle continues.
How do we change that?
Well we spend a month doing what we usually do but this time we keep a journal. Every time you spend money take note. What is the amount, what is it for and how it makes you feel? Now I can already tell you buying groceries is not the same as buying that new shirt on sale. At the end of the month look at your journal and add a note next to each one, this note needs to ask the question, was it necessary? The reason you don’t write this with your entry is simple, at the time of purchase you will feel that everything is necessary, after some time has passed you may look at it differently.
So why is this financial diet important? This diet will help you identify your triggers, why do you buy impulsively or why do you not wait to see if there is a better deal. In the moment our purchases always seem to be the best idea but after reflection and thought 60% of spending could be curbed. When you start this diet, you must be very aware of every purchase, the reasons you purchase, the systems you use and why you feel the need to make these purchases. This will be important when you look back at your spending.
After you have kept a spending journal for a month accessing how you spend you will notice your patterns. Maybe you’re an impulsive online shopper or you disregard your budget when walking into a store. Now you can change your system. If you overspend every time you are in a shop then the immediate change would be trying online shopping. Most shops offer delivers and with technology evolving some chains have made it even easier. If you only need bread and milk but know you will end up buying snacks then why not try a shopping app. Get your bread and milk delivered at no charge and keep your extra cash?
If you like spending online why not set a budget before shopping and walk into a store? You need to change how you spend in order to reach your goals. Systems take us to the end result but if we keep with the same way of doing things then we cannot expect a different result.
We hope this helped you see finance in a different way. Let us know down below if you have tried changing your systems?
United African Stokvel is always looking for ways to help our members. This blog is intended to help our members think about their finances in a different way. This information is not intended to be a substitute for a financial advisor, you should consult with a financial advisor before relying on this information.