Managing your student loans is always a challenge. And during the holiday season, it can be even more difficult than any other time of year. It’s just too easy to get caught up in the spirt of giving. When shopping for friends, family and even ourselves, it’s not hard to justify spending just a little more to put a smile on somebody’s face. And when every advertisement is designed to appeal to that desire, it becomes almost impossible to overspend.
So while giving gifts should be a joyful event, no one wants to ruin those moments with unhappy feelings of doubt or dread. So how do you survive this holiday season without ending the year too frightened to open up your bank account or credit card statement?
Get a Budget – Stop Budgeting!
Here’s one piece of advice that probably goes against everything anyone has ever said about finances: stop budgeting!
For a lot of people, budgeting is broken. It doesn’t work. Every month is different and trying to plan 30 days ahead of time exactly how much you’ll spend on everything is just insane. It would take a statistician, economist and even a psychologist to have a decent shot at figuring out how much you’ll actually spend next month.
Now I’m not talking about the fixed payment “non-discretionary” spend that is the same from month to month. Rent, utilities, car and student loan payments are pretty much constant. There’s usually nothing too difficult about figuring out how much you’ll spend there. But when it comes to allocating the rest of your “discretionary spend” to different buckets, all bets are off.
Whether because a friend is in town, or it’s your significant other’s birthday, or your car had a flat, life is full of both variety and surprises. And while you could spend every month trying to predict, and plan, and track every dollar of spend, very few of us have the time or discipline to do it.
The holidays are a perfect example. While you probably have at least a vague sense of how much you’ll spend on gifts this year and how much it will cost to get to grandma’s house, have you factored in all the ripple effects it will have on your grocery, dining out and other expenses?
As an alternative, I suggest that you get a budget and stop budgeting. In other words know exactly how much discretionary spend you have and manage against that without trying to stick to exact amounts by category. For most of us that is actually how we operate day to day. We know that we have so many dollars at our disposal each month and then make daily decisions on how to allocate it.
Stop Tracking Your Money – Let it Track You
Unless you’re writing down every dollar you spend, figuring out how much you’ve spent this month across your debit cards, credit cards, store cards and everything else can quickly become a nightmare.
Fortunately there are two easy solutions. The first one is to structure your finances so that you’re non-discretionary spend comes out of one account and all of your discretionary spending is managed out of another. This is particularly easy to do if you only use debit cards. If you use credit cards, it can be a bit more complex, but it can be done. Once set up the only thing left to do is to check your balance each day and make sure that you’re not running out of money before you run out of month.
The second approach is a little different in that you stop worrying about tracking your money and start letting your money track you.
You can do just that with the financial service product that our friends at Moven have been developing. Like the solution above, Moven provides you with a debit card to use for your day to day discretionary purchases. But it also provides you with a sophisticated mobile app actually designed by a statistician, economist and psychologist (as well as a whole bunch of other smart people whose only focus is finding ways to help improve your financial health). When you use the mobile app you get two very important tools:
- A spending meter that compares how fast you are spending to your typical rate of spend. Simply link all of your spending accounts and Moven analyzes your prior transactions to learn about how you spend. Then, after some pretty intensive analysis, Moven summarizes all of it for you in a single screen that tells you whether you are in the green, yellow or red compared to where you should be at this point in the month.
- The second thing Moven provides is an instant receipt with every purchase you make using the Moven card. This instant receipt gives you real time context on your spending. Buy a cup of coffee in the morning and Moven will not only update your spending meter, but it will also tell you how much you’ve spent on dining out so far this month. Buy a carton of milk on the way home, and the same will happened but with an update on your total grocery spend.
Put these two tools together and this holiday season you can find yourself sticking to a budget without ever budgeting. And your spending will start tracking you rather than the other way around. You’ll maintain the flexibility you need to make your own personal spending decisions each day and get the feedback required to help you stay on track.
Note: This blog posted is sponsored by Moven, one of our trusted partners.