Much like a person, a budget often needs proper management to keep it on the straight and narrow. Now there are some people out there who would say, “I’m a motivated individual. I don’t need my manager in order to do my job properly.”
For a few, that statement might almost be true. But isn’t it your manager who gives you your annual review, provides a raise, issues various goals and motivational techniques or consequences to encourage you to push yourself just a little bit harder? Yes, I’m afraid that without our mangers, many of us would eventually loose our edge, not turn out the level of productivity needed, and over time, loose our focus and will to succeed at our work.
Our budgets need similar managing to keep them on track, and you might be surprised that many of the techniques that keep a person goal-oriented and successful could also work with a budget as well.
An Annual Review
Much like you might find employees receiving in a typical work environment, it’s probably a good idea to give your budget an annual review. With employees and team members an annual review provides them feedback upon their performance during the last year. How they ranked in certain areas of their job, whether they met certain goals set during the last review, and how they performed overall might be areas in which they are reviewed.
You could use similar areas to rank your budget’s overall performance and compare it year over year. While only you can change the performance and level of success your budget achieves, an annual review can help to identify weak spots, areas of improvement, and places where you and your budget have met or exceeded goals. Unlike monthly updates or adjustments that you might make to a budget, an annual review should be more in-depth, using the review not only as a performance appraisal, but as a planning tool to help you determine where you should make adjustments and pinpoint new goals in upcoming budgets.
The great part about giving an annual review to a budget rather than a person is that you won’t have to listen to your budget complain and storm off to human resources if it doesn’t like hearing what you are telling it.
A Raise or a Pay Cut?
Typically, when we receive our annual review at our place of employment, it will hopefully be accompanied by a pay increase. This wage adjustment is often reflective of our yearly performance, and while in many cases we might not feel it is enough, we must admit to ourselves, something is better than nothing.
The yearly review of your budget may also be accompanied by an increase or decrease depending upon numerous factors. These factors may not be based so much upon the success of your budget, but things such as a cost of living increase, the purchase of a home, home improvement, the birth of a child, loss of income, or decrease in income, and similar changes that can affect personal finances.
Some years you might find that you over-budgeted and may be able to reduce the amount of next year’s budget. In other cases, you might find that you underestimated your expenses and need to beef up the old budget in certain areas or just overall. Bear in mind however, that like someone receiving their review at work, your budget may become overconfident if you give it too large of a raise, causing it (actually you) to become lazy or complacent when it comes to staying within set parameters or meeting certain goals.
Motivational Techniques, Rewards & Consequences
What would an annual review be without rewards and consequences? Managers use them all the time to push their employees harder and eke out that little extra effort to push productivity standards higher. The same may go when dealing with your personal budget. Just as employees need motivational techniques, and rewards and consequences to help them achieve their work goals, you might need similar tactics in pushing yourself to meet your budgetary requirements. At work, positive reinforcement might come in the form of a monetary bonus, awards, a bigger raise, a promotion, or verbal praise. Negative reinforcement could be the loss of an annual increase, diminished work responsibilities, demotion or even loss of job.
Different people react to motivational techniques in various ways. Some require praise and rewards to work harder, others must be pushed through the threat of consequences or punishments. How you push yourself when it comes to your budget must truly be left up to you. You might decide whether rewarding yourself with a dinner out, special vacation, or similar treat when you achieve your budget goals is a good way to motivate yourself. It could be that the threat of reducing a certain entertainment budget line or similar expense area if you don’t meet your goals will force you to work harder in the pursuit of living within your means. Whatever it takes, consider outlining certain rewards or consequences during the annual review of your budget to help push you in attaining your financial goals.
The author is not a licensed financial professional. The information provided in this article is for informational purposes only and does not constitute legal or financial advice. For financial advice, readers should consult a licensed financial advisor. Any action taken by the reader due to the information provided in this article is solely at the reader’s discretion.