Aim For Sustainable, Not Extreme Finances
When you decide to make a lifestyle change, it’s easy to go for an all or nothing approach – after all, you want to see results as quickly as you can.
This is what leads to people crash-dieting or throwing away all of their belongings in order to embrace minimalism, and it can also be the thinking behind ‘extreme personal finance’.
Extreme personal finance refers to committing to a specific goal – such as saving for retirement or living an austere lifestyle – to such a degree that you no longer spend money on anything else. It might include…
- Cutting out all non-essential spending, denying yourself treats or unnecessary purchases
- Not going on holiday or taking days out that cost money
- Only saving for one, very specific savings goal and not spending money on other things
While it might seem like a good way to get your finances back on track, there are actually several big concerns. The first is that it’s difficult to maintain. If you cut down on your meals out, so that instead of two per week you’re now allowed two per month, then that’s a sustainable change that allows you to reward yourself. If you decide to cut them out altogether then you may find that you simply don’t have the willpower to make the change last.
The second, more serious concern, is the fact that laser-focusing on one financial goal doesn’t give you better overall financial health. If you decide to put yourself on an extreme budget to pay off credit card debt, then you need to make sure that you’re also educating yourself on how to use credit cards responsibly in the future, or starting a savings fund so that you don’t have to use them at all.
So what should I do instead?
It’s all about getting educated and taking a balanced approach. So, if you want to get your finances in order then here are a few suggestions to help make sure it’s a sustainable change:
- Read up on personal finance, until you understand all of the basics. This blog is a great place to start, as is the moneysavingexpert site.
- Set yourself some financial goals. These will help you focus, but shouldn’t be mindlessly pursued at the expense of your quality of life.
- Create a budget. This needs to account for both your current living expenses and your long-term goals (be it saving money or paying off debt). Try to find room in the budget for a couple of treats, even if it means taking a couple of extra months to reach your long-term goals.
The final thing to remember is that you need to be flexible. With an extreme personal finance goal, such as retiring at the age of 45 or paying off your student loan debts in a year, you’re only giving yourself room for two options – success or failure. By setting yourself smaller targets, you can still celebrate important milestones; it just means that you don’t have to panic if something unexpected occurs.
Latest posts by Paul (see all)
- Boost Your Credit Score Without Taking More Debt - May 23, 2018
- Money-saving Tips That Aren’t Worth Your Time - May 18, 2018
- Max Appeal: 6 Tips to Help You Sell Your House Quickly - May 17, 2018
- How Does Interest Work on Credit Cards? - May 17, 2018