Broke after the summer? Try this exercise for a financial reset.
Summer can be the most expensive time of the year, as there are just so many fun things to do and places to be. Unfortunately, all this fun might make a dent in your wallet if you’re not extra careful.
If that describes your summer, then you might be ready for a financial reset. Getting back to your money goals doesn’t have to be complicated. In fact, our best recommendation would be to start very simply: set a budget to one spending category and stick with it. For example, try to spend 30% less on eating out in September.
Why is that your best recommendation?
Research says that humans have many flaws in our thinking that sometimes work against our own long-term financial interests. At Bilance, we believe that healthy financial habits are the key to overcoming these flaws. We also believe that the best way to build habits and make progress is by taking small, actionable, and achievable steps over time.
Setting just one budget helps you get moving in the right direction: towards building healthy financial habits and taking specific steps.
How to set a good budget?
We have broken down the steps below – it shouldn't take more than 10 minutes.
Step 1: Choose a spending category.
Select a category you want to spend less on and can quickly reduce. Some good options might be Food & Drink, Shopping, Life & Entertainment. Decreasing your spending on categories like Home or Transportation requires bigger lifestyle changes that likely take more than a month.
Step 2: Review your summer expenses for that category.
Open the ‘Overview’ tab in Bilance, choose a category and swipe right to see previous months. You might want to double-check if all the expenses from previous months are correct.
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Step 3: Calculate your average monthly spending.
Unfortunately, Bilance can’t yet calculate your average spend over months, so use Excel, notes app or pen and paper to mark down your expenses and calculate the average.
Step 4: Set the spending limit for September.
Aim to lower your spending by a significant but realistic amount. We suggest setting a budget 30% lower than your average spending. For example, if you spent 300€ on the Food & Drink category in the summer, try setting a budget for around 210€ for September.
Step 5: Set up a budget in the Bilance app.
Open the ‘Planning’ tab and tap on the ‘Add budget’ button. Then fill out the title, monthly limit and category.
Step 6: Congratulations, you now have a budget for September!
Going forward, the Bilance app will track your budget and show how you’re doing. See the ‘Planning’ tab and tap on the budget to see expenses under this budget and whether you are on track towards your goal.
Step 7: Now, all you have to do is to stick to the budget.
We know that’s actually the hard part. To stay on track, we’d recommend checking in with the budget once a week, for example, every weekend, so you’d know how you’re doing. Additionally, remind yourself of the goal when making purchases.
In conclusion, by setting and sticking to a budget for a single spending category, you can hopefully save some money in September. Perhaps even more importantly, it will help to reset your financial mindset and get you moving towards your money goals again!