All About Transition Budgeting and How it Will Finally Fix Your Finances


Whether we’re talking about hitting the gym, calling mom more often, or reining in our budgets, resolutions are gleaming, beguiling peaks that few ever climb. The thing is, there’s something lurking under our resolutions; often unacknowledged, it resists change, anchoring us to our old habits. Maybe you’re too tired when it comes time to leave for the gym and you promise yourself you’ll go tomorrow. Maybe a Netflix show is starting just as your reminder to call mom chimes. You know how it goes. Fortunately, if your resolution is to reshape and master your budget, you’ve got a new best friend that takes into account the human inclination to resist change; transition budgeting.

Meet Transition Budgeting

It doesn’t matter whether you’re trying to quit smoking or slash an entertainment budget in order to put more money in savings – quitting anything cold turkey demands a monumental amount of willpower. The problem with cold turkey is that the stakes are binary and unforgiving. One misstep, and you’ve lost. The method simply doesn’t value approaching success step by step.

Transition budgeting removes the stress of typical all-or-nothing New Year’s resolutions by creating stepping stones that ease you towards your budgeting goals. While your budgeting goals might be substantial and concrete – paying off a loan or bumping your savings from 0% to 25% of your income, for example – your methodology doesn’t need to be. Instead of expecting yourself to pole vault to immediate success, you can use transition budgeting to create steps up to your goal. Wallet Hacks has a great transition budget walkthrough, but here are the basics of how it works.

  • Start by creating a budget spreadsheet, with all incomes and expenses in the first column (the Wallet Hacks article includes a downloadable example to get you started)
  • In the second column, enter your budget data from the current month
  • Five columns over, enter your target budget data
  • In the columns between your current and target budgets, enter budget data points that move steadily from point A to point B. 

Transition budgeting is that simple. Let’s walk through it using an example. Say you’re currently spending $300/month on entertainment and saving $0, but you’d like to shift $200/month from entertainment to your savings. Well, immediately stripping two thirds of the joy from your budget sounds like a recipe for failure! With transition budgeting, you’d simply subtract $40 from your monthly entertainment allowance until you reached the goal of saving an additional $200/month. Giving up one show or dinner out per month will feel gentler (and more possible!) than simply not going out anymore.

The easiest budget improvements you can make are on your flexible expenses like entertainment or dining out, but don’t forget that you can also make gains on fixed expenses like phone and cable bills by renegotiating terms when your contract ends. You can also save on interest payments with a balance transfer card, and make use of credit unions and free smartphone apps to help your transition budgeting thrive. 

Feeling confident about making your New Year’s resolutions transitions yet?

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About the author
Adam Murray

Adam Murray

Adam Murray is an author, editor, and a member of the Independent Publishing Resource Center in Portland, OR. As a Truebill contributor, he is passionate about giving readers actionable ideas that support financial wellbeing.

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