Search for any money solutions and you will inevitably find the advice to use a budget – it’s the “go-to” solution for everyone from financial gurus to money-saving, coupon-clipping moms. Add to that the plethora of budgeting apps that have appeared over the last several years, and you might just think that budgeting is the ONLY solution for any money issues that you might have. (Heck, YNAB even states that you NEED a budget!) But there are a number of reasons that you should NEVER BUDGET.
Budgets don’t address emotions
While budgets are a great way for businesses and corporations to make decisions about money, they fail to address the emotions attached to money that individuals, and especially couples have.
It’s a simple process for a company to plan that 20% of total revenue should be directed into marketing to generate new business. It’s a much different matter to put 30% on a piece of paper and say this amount is how much I/we should spend on housing each month, or $100 each month on clothing.
Financial matters are fraught with emotions. Some are positive, but many fall into the extreme negative category, and thinking that you can simply “tell your money where to go” and solve all of your problems is naive.
Before you can truly succeed with your money, you need to address the feelings that you have surrounding money so that you can change your spending habits. A budget, quite simply, doesn’t do this at all. A budget assumes that if you are told “this is your spending limit”, then that is your limit. Period. End of story. But what happens when those emotions rear their ugly heads?
You guessed it, the budget falls by the wayside. Very quickly!
I’ve heard too many people say that they spent so much time trying to create the “perfect” budget that takes into account all of their needs and the needs of their family, only to get so tired of planning the budget that they never implement anything they outlined. Well that’s a waste!
Even if you don’t fret all of the details to get it “just right”, there is still a significant time sink in planning out how much of your money should be directed into the various categories of your life.
And what happens when life inevitably “happens” next month (or three months down the road) and throws a massive curve ball at your spending? It’s back to the drawing board once again. And more time spent. Or maybe you just throw in the towel and decide you just aren’t good with money.
Are you thinking that one of those slick budgeting apps will do all the work for you so that you don’t have to spend any time creating a budget? Well… you should probably read this first. (LINK to article not written yet)
Budgets are like diets
Have you ever been on a diet? Or know someone who has?
What happens when you are told that you can’t have a specific food or type of food? You start obsessing about that food. Literally thinking about that food all the time. Day and night. It’s there like a looming temptress, daring you to ditch the diet and revert back to your previous habits.
Luring you with thoughts about how good that food will taste. Reminding of how much you have enjoyed eating that food.
Going on a budget results in exactly the same response in your brain.
Let’s say your budget dictates that you can’t go out to dinner. It’s a great way to save money, but what happens? You start thinking about going out to eat ALL THE TIME. You wake up thinking about your favorite restaurant. Your co-workers are going out for lunch?
You don’t go, but you spend your lunch hour wishing you were with them. You fall asleep fantasizing about how much enjoyment you would get from just one meal out.
The problem is that when we restrict ourselves, our brains naturally focus on what we can’t have. Think about what happens if you take something away from a child. They might have 100 toys to choose from, but they want the one thing that you took away from them. It’s human nature.
So just like dieting rarely works to help you lose weight long term, budgeting rarely works to help you save money long term.
You revert back to old habits
Let’s continue that dieting analogy for a moment. What happens when you give in to the temptation and ditch the diet? Or you somehow knuckled down, lost the desired weight, and are now finished with your diet?
You often gain back more weight than you lost in the first place, forcing you to go on another diet. This is yo-yo dieting at its best.
And once again, the same proves true with budgeting as well. Let’s say that you had been on a budget and the temptation to spend became too strong and you said, “forget this”. Or, you managed to hit your goal of paying off your credit card and decide that you’re done with your budget.
Just like with the diet, you often end up in a worse financial situation than before you started. After all, you were so “good” that you need a reward, right? You really wanted to go out to eat, or buy some new clothes, or whatever else you were restricted from…
So you go out and spend some money. And it feels so good, so you do it again. And again. And before you know it, your credit card is once again maxed out, or your savings account is empty.
It really boils down to your spending habits. When you don’t change your habits – or you are forced to change them just while you are budgeting – you revert back to those same habits as soon as you are “done” with your budget. And your financial situation takes a nosedive.
So if budgeting isn’t the solution to any money issues you might have, what SHOULD you do instead?
You could continue on with what you have been doing… But that sounds a little like Einstein’s definition of insanity (doing the same thing over and over again expecting different results).
Or, you could find a different way of looking at your money. A way that takes into account your emotions, your time, AND your habits. Take a read here (Link to blog not written yet).