BUDGETING

What's Your Money Cycle?

Understanding your relationship with money will help address any unhealthy habits and strengthen healthy behaviors. One of the first steps to recognizing what kind of relationship you have with finances is to identify your personal money cycle.

Money cycles are spending and savings behaviors. Factors of these cycles could be environmental, social media, and/or financial literacy. These factors contribute to the development of the types of personal money cycles we exhibit. Recognizing your cycle will help determine what changes you can make to achieve your financial dreams.

The Cycles

There are four main types of money cycles. Let’s break each of them down.

• Earn-Spend-Borrow-Spend: This cycle relies on borrowing money to afford financial responsibilities and variable expenses.
• Earn-Spend-Earn-Spend: This cycle usually leaves no money after spending. This is commonly known as living paycheck to paycheck.
• Earn-Spend-Save: This cycle typically pays for all expenses and aims to save afterward but may dip into savings to pay for expenses.
• Earn-Save-Spend: This cycle focuses on saving first and aligning saving with goals. Expenses are paid after saving.

The ideal stage to be financially successful is Earn-Save-Spend. Placing a priority on savings and connecting that priority to life goals aids in avoiding overspending, borrowing from savings, and even overborrowing. The more you practice saving, the better you will be at escaping cycles that don’t serve you, which will stop you from dipping into those savings for impulse purchases, better preparing you for unexpected expenses and emergencies. The first three cycles may cause strain on personal finances, which can strain our physical and mental states.

Identify and Grow

Identifying your money cycle will help improve your relationship with your finances. When making any changes in life, starting small is always good. Money cycles are habits developed over time. When making a change remember that habits are not always easy to break, consistency is important, and so is grace. It can sometimes take much longer to break a habit than to develop one. Remember that each cycle can always be enhanced. Know your cycle, make changes, adjust, and grow!