WHY A SIMPLE MONEY SYSTEM WORKS BETTER THAN A STRICT BUDGET
Many of us have grown up with the belief that personal finance needs to be complicated.
We think we need to track all of our expenses in an app and set limits on how much we spend on groceries and takeaways.
Ultimately, it's all about control and limiting our spending instead of living the lives that we really want.
The issue here is that willpower is rarely the fundamental problem.
Strict budgets lead to an excess of decision-making. At every turn, you're constantly having to decide whether you want to spend money or not.
The best way around this is to use a money system instead of a budget. Here's what we mean.
Why budgets break in real life
Have you or anybody you know ever managed to stick with a budget long term?
It can happen, but it's incredibly rare.
The problem is that life tends to get in the way. While some people regret spending too much money on a purchase, expenses often crop up whenever you move home, buy a car, or settle into a new job. It's something that simply can't be helped.
Ultimately, what you want is a system that eliminates the risk of you having to constantly say no in the moment. Instead, you want an approach that allows you to take care of temptations that might come your way in advance.
What does a money system look like?
A money system has several moving parts.
The most important moving part is to have separate accounts for essentials and discretionary consumption.
When you split your money this way, you can allocate a specific amount for spending each month and refrain from going over that.
A money system also requires regular monthly check-ins to look at your balances and how much you're spending.
You need to know where money is going and whether there are any leaks in your plan, and then you can come up with clever ways to prevent these from forming in the future.
Why a money system matters more for women
A personal finance system for women matters more because of career breaks due to pregnancy and also the higher likelihood of doing part-time work. Women need systems that they can fall back on to assist them with some of the challenges that they typically face in their lives.
Any money system women develop needs to work best for real life itself. It can't be an ideal or aspirational. It actually has to work day to day.
Start with just one thing
As with many changes, it's often best to start with just one small thing instead of trying to do everything at once.
If you try to do literally everything, it can get overwhelming, and you can crash out because your life changes too much.
For example, you could set up savings accounts with specific names, like your next trip to Bali.
Once you have one thing in place, you can then focus on adding one more thing every week to your money routine so that, by the end of the year, you're in a better financial position.
