How to Convince Yourself You Have Less Money
Posted June 15th, 2009
and last modified July 21st, 2009“Why would I want to convince myself I have less money?”
Simple. If you have less income, you can only spend so much of it.
If you’re spending 80% of your income and earn $1500 a week, you’ve spent $1200 and saved $300.
On the other hand, by psychologically tricking yourself into an illusion of less income, you may be more inclined to spend less of your income. A new form of budgeting rising in popularity among financial planners is the ‘bucket budget’ or more commonly referred to as ‘bucket budgeting’.
How do I start bucket budgeting?
The key element to bucket budgeting is splitting your income into three separate accounts.
- Long-Term Savings: First off, dedicate a percentage portion of your income into a savings fund.
- Fixed Expenses: This account is dedicated to non-variable expenses such as loans, mortgages, gas and electricity.
- Variable Expenses: To ensure this plan works, this account should have a relatively less amount dedicated towards it. Examples include groceries, parties, going out and leisure.
Where does the psychology fit in?
By using a central pool of income, it becomes more difficult to tracks costs and expenses.
By dedicating funds into separate accounts, people have less interest and temptation in withdrawing funds from special ’savings’ or ‘non-variable’ accounts.
Take it a step further by applying for a high interest savings account which penalizes your interest accumulation if you make a withdrawal during a month span.
Assigning this account to your long-term savings will be a powerful psychological aid in a quest for saving money.
What advantages does this method have?
Apart from the positive psychological influence, organizing income into three separate accounts is both easy to manage, and easy to track your expenses.
Bucket budgeting is a practical and basic way to manage your money if you have little time or money for a ‘tailor-made’ strategy from a financial planner.
Interest rates are currently low, but that doesn’t mean all high interest savings accounts have been obsolete. Rates on savings account are currently varying by up to 4%.
St George are currently offering a competitive 4.50% p.a. on their St George Direct Saver account.
See the official St George Direct Saver offer here.
Related posts:
- Guide: How Much Money Should You Save to Avoid Financial Disaster?
- How To Budget And Save Money
- Baby On The Way? Money and Credit Tips for Soon-To-Be Parents
- Guide to Budgeting: Saving Money And Managing Your Expenses
- How to Invest Your Money and Build Wealth with St. George Investment Products
Show Comment Form
Editor's Choice: Our Top Credit Cards
Bankwest Lite MasterCard
Cheapest Credit Card
The lowest stress mastercard, with Australia's lowest MasterCard purchase rate of just 10.75% p.a.
St George Vertigo
Best Bank
Low 2.99% for 6 months (reverts to 11.99%) p.a. interest rate and balance transfer rate, from one of Australia's most respected banks.
Coles Group Source MasterCard
Citi Clear Platinum Visa
Low Interest
An excellent low interest credit card offer with 11.49%interest on purchases and 0.99% for 6 months on balance transfers .
Bankwest Zero Platinum MasterCard
No Annual Fee
Excellent introductory offer with a $0 annual fee for the life of the credit card and a 1.99% p.a. for 9 months on balance transfers