Watch Budget Hacks: From Research to Practical Below
Know Your Money Personality
During the webinar, we talked about the Klontz Money Script Inventory and how our beliefs about money can dictate our behaviors. If you'd like to delve deeper into understanding your own values and habits around money, you can try the Money Harmony quiz.
There are several different types of money personality inventories, just as there are several different types of regular personality inventories. The main idea here is to be aware of what your financial habits are so you can develop a financial plan that works with your strengths and weaknesses.
The Money Harmony quiz can be used as a basis for understanding different aspects of financial habits that can cause "imbalance" in our financial lives. This money personality inventory can show you how differences in how we manage money could cause conflict when making financial decisions with another person, like a spouse, parent, sibling or roommate.
| ||Resource drain consists of factors like spending temptations which can cause impulse spending and decision fatigue. Reduce resource drain by understanding how it occurs.|
When you think about managing money, or creating a budget, what’s the first guideline you think of? Probably how much your salary is… maybe what your take-home pay is after taxes.
Government assistance (like SNAP for students), the library, public transportation or gifts are probably NOT the first things that come to mind, but they are definitely important pieces to the budget puzzle. Sometimes, resources can be a surprise, like a gift, or an unclaimed asset. Unclaimed.org is a great site to see if you have unclaimed money somewhere that you don’t know about!
Cooperative Extension offices are located throughout the nation and have community educators that share information from Universities with communities that they serve. This is a great resource for learning. University of Illinois Extension has educators throughout the state that help people through things like Money Mentors, Master Gardeners and 4H programs.
Make sure to investigate what is in your community to help you make the most of your resources.
Impulse spending is a challenge for most of us. Companies sometimes take advantage of our weakness for impulse purchases by placing things like snacks next to the cash register or promoting "flash sales". Know how to avoid unplanned costs by recognizing the reasons we make impulse purchases.
- Love Shopping - Some people just really enjoy spending money or getting new things. Recognizing if this is your weakness is just half the battle. Plan for "fun money" in your budget so you can still have fun and avoid worrying about whether or not you can pay rent this month after your shopping spree.
- Loss Aversion Switch - This may more accurately be described as the "fear of missing out" on a deal. Marketers use limited time sales and coupons, and if you don't buy it now, you'll miss out on the deal! You may also experience this when surprise opportunities come up. Instead of waiting around for someone else to plan an exciting activity, take the lead! You'll know how much to plan for, and you'll feel good about taking initiative.
- Twisted Heuristics - We create our own "rules of thumb" to avoid decision-overload when it comes to purchasing an item, rather than comparing and researching each item. Marketers take advantage of this by selling items in bulk or adding a "free" item to make us think that the purchase provides more value. To reduce the likelihood of this happening, set guidelines for yourself on when you'll do additional research - maybe if the purchase is for an electronic device or above $35, you'll make sure to do additional research.
- Desire to Save - Beyond the loss aversion switch, most of us have the innate desire to save - be it time or money. Advertisers recognize this by telling us how much time or money we will save by purchasing their product(s). To avoid becoming a victim of the "$100 VALUE" claim, ask yourself if the item is a need - a deal isn't a deal if you do not use the product.
- Rose-tinted Lenses - We believe we are better than we actually are - better skiers, better friends, better cooks - you get the point. We want to believe that a product will change our behavior, because the future me is better than past me. Be honest with yourself - try changing your behavior first and then decide on whether or not a product will make that behavior easier or more lucrative.
One of the best ways to avoid impulse spending is to make a list before you shop. You can make a list for all types of things - groceries, gifts, home supplies or hygeine products. There are both free and for-purchase apps you can download to help you with this if you are the type of person that can't remember to take that paper list to the store but won't forget your phone anywhere.
Creating a budget and sticking to it is difficult for a lot of people, but there are so many tools you can use to both create a plan and track your spending that there’s no reason not to do it! Like with any other life skill, you just have to make it work with your own lifestyle and preferences.
When it comes to building your budget, remember these 5 steps:
Budget & Spending Plan Tools: Both the Student Money Management Center and University of Illinois Extension's Financial Wellness for College Students have budgeting and expense-tracking resources for you to use.
Let us know if you have other questions about the best tools to use to build your budget and track expenses! If you're on one of the University of Illinois campuses, you can even request an individual financial coaching session by completing this form.
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