How to start saving money? 4-day financial challenge

Financial stress is a very common phenomenon, especially in times of economic instability. Financial pressures and lower incomes are literally killing sleep (stress-related insomnia is reported by more than 40% of participants in the latest “Stress and Work” survey). That’s why we encourage you to take our 4-day challenge, which combines financial and psychological knowledge to help you get your household budget in order and set realistic, achievable goals.

Day 1: Make a list of income and expenses

If you*ve tried to run a household budget before without much success – don’t lose faith. Such an experience is behind many people. Procrastination in the area of money management can be one of the symptoms of financial stress. Therefore, give yourself permission to feel emotions such as discomfort or even anxiety – there will be fewer of them as you take control of the situation.

On the first day, open a spreadsheet and make a note of these values:
1) Your monthly income from work and any supplemental income from side jobs and other sources, such as renting an apartment to someone.

2) Fixed expenses (all the fixed costs you have to pay each month: rent or mortgage, condo fees, bills, subscriptions, insurance, etc.). 

3) Monthly debt payments (e.g., credit card bills, consumer loan installments).

Day 2: Determine variable costs

If you pay for most things by card or bank transfer, at this stage you only need to look at your account’s spending history. With cash purchases, the matter is a bit trickier – you need to write them down to get a clear picture of what you mostly spend your money on.

Enter all the information into the sheet. Then tally them up, dividing them into categories such as food, pleasure, gifts, basic shopping, clothing, etc.

Now take a moment to find patterns in your spending. Ask yourself questions and question each spending group before you consider it necessary:

• How much do you really spend on a particular area of life: food, transportation, entertainment? Which of these areas is important to you, which is essential, and which do you not care about at all?
• Does “pleasure” spending really make you happy? Many people do not experience the expected satisfaction from their purchases, especially when they tend to toxic comparison to others.
• Are there subscriptions on your expense list that you don’t use? Instead of explaining to yourself that you’ll still use them, it’s best to cancel them right away, thus reducing fixed costs.

Day 3: Take stock and draw conclusions

Your sheet presents a clear picture of how much you earn and spend. You can now calculate your income minus expenses and check the difference. 

Is the balance of your budget positive (receipts exceed expenses) or negative (expenses exceed receipts)? Depending on the outcome, the next step will be either to work on reducing expenses wherever possible or to manage financial surpluses.

It is worth considering a savings strategy at this point. According to a survey in July this year, 31% of Poles have no savings. In many cases, they are unable to increase their income or pay off their liabilities. Sometimes, however, the lack of savings is solely behind the lack of a plan and the impulsive spending. Therefore, the next step of our challenge is to set financial goals that are in line with your needs and values.

Day 4 – Set goals

Keeping a household budget brings long-term benefits from the moment it becomes your habit. It is worth working to maintain this habit if only for the sake of the psychological benefits it brings (long-term avoidance  exacerbates financial stress, while a sense of control and transparency reduce it).

On the fourth day, think about what is important to you and what you want to achieve in the coming months and years. Break your goals into smaller ones for which you will be rewarded – achieving a goal should be enjoyable and motivating. Science tells us that a good goal is one that is:

• Concrete
• Achievable
• Measurable
• Relevant (in line with your needs and values)
• Defined in time

Take care of yourself

Conscious financial management is sometimes akin to switching to a new diet. Unrealistic expectations and excessive self-criticism can lead to obstruction of plans. Therefore, be forgiving to yourself*. Think of money management as something you do for yourself and your well-being.

If you are experiencing unpleasant feelings about finances, or if the situation is overwhelming you – you are not alone*. The survey “Mental Health of Poles in Times of High Inflation” conducted on a sample of 1,034 adult Poles indicates that in the fourth quarter of this year, the percentage of people declaring that they are losing their mental health for economic reasons will rise to as much as 70%.

If necessary, do not hesitate to reach out for psychological support. At any time you can seek professional help from a psychologist, psychotherapist or financial coach.