Have you tried and tried to create a budget and stick to it?
Is it working for you?
If you are reading this blog post, probably not.
There are many reasons why your budget may not be working, but you are not alone. Only 32% of U.S. households have a budget- in spite of almost half of Americans feeling anxious about finances. Let’s take a look at some of the common reasons why budgets tend to fail:
Budgets make you deal with too much at once, all the time.
Like dieting, if you dive headfirst into a sudden “all or nothing” approach to your finances, you’re setting yourself up for a very short-term success. Making a change is good, often necessary, in order to get results, but when you make such sudden and restrictive changes anywhere in your life, you’re much more likely to fall back into your old habits, and feel like a failure for it.
Budgets assume an almost infinite amount of self control.
According to this study from the Journal of Consumer Psychology, self-control is not limitless. If we use our self-control in one area (like finances), the study suggests that we end up sacrificing it in another area. One example in the study was two groups that were given a set of problems to solved showed that the group who was also trying to resist cookies gave up trying to solve the problems faster. When a significant portion of our self-control is being used in one area of our lives, it’s more likely that we’ll fail to show willpower in another area.
Thinking of life month by month is not a great way to manage your life.
When people draft their budgets, they often forget to account for non-monthly expenses, like doctor’s appointments, holidays, or even that unexpected events like emergencies will come up. Also, it can be hard to think of big, long term goals like home ownership and retirement with a budget. A more accurate budget has to incorporate irregular and large future expenses can get overwhelming fast.
Budgets can feel restrictive.
Most people have a preconceived association with the word “budget,” much like the word “diet.” Whether or not you consciously realize it, when you decide to create a budget, you could be creating a negative association in your mind. And, like most things, if you don’t have a positive mindset towards it, you are less likely to stick to it.
While it may seem like the general concept of budgeting should be simple, the reality is a bit more complex.
The good news is there are better ways to approach your financial goals. According to this article (and others), some strategies include breaking your big goals into smaller ones, and approaching your new money mindset as something that will bring you future joy, rather than cause deprivation and suffering. When I created my course, I made sure not to use budgets for many of these reasons.
So please know you can have financial success without a budget. I know I do.