Bad Budgeting: When Good Intentions Fall Short

In debt? Build a budget.
Financial goals? Build a budget.
Marriages, births, moving? Budget, budget, budget.
No matter your personal finance question, your search will probably end with "make a budget" as the answer.
But is a budget the correct answer in every circumstance or an easy copout that takes the hard work out of
managing finances? The bottom line is that, no, generic advice to budget is not only unhelpful but can be actively
detrimental to your wealth's well-being. Although caveats exist, most Americans should focus on other tools
available rather than developing and managing a tight budget.
Restrictive Mindset
We’re all human, and human psychology is tricky. For many, restricting anything acts as a pressure cooker, building
momentum to spectacular excess that negates all the hard work.
Think about it from another perspective. As many as 80% of restrictive diets fail, and the parallel is clear. Both
budgeting and dieting start with the best intentions, and that motivation leads to lofty and impractical goals.
“I’m cutting out sugar and limiting my calories to 1200 daily.”
“To save money, I’m never going to eat out, go to the movies, or enjoy entertainment that isn’t free.”
The common thread is that they are both unsustainable. Think about it. If you restrict, restrict, restrict your
spending and then splurge a tiny bit on an unplanned and unbudgeted luxury, you may be able to get back on
track. But, like dieting, you're more likely to seize that dopamine hit and buy, buy, buy.
In fact, the trend is so common it has an official name. Revenge spending, an old and proven concept that came
back into vogue post-lockdown, is “the urge to spend money to make up for lost time.” Flush with cash from a
month or more of budgeting, budget-breaking revenge spending is compounded because you saved by budgeting
expenses. With more cash on hand, you're likely to buy items you wouldn't have pre-budget, and the comparative
feeling of wealth spurs the urge further. This nearly unbreakable vicious circle puts you back where you started, or
worse.
And how does that make you feel? When you make a promise to yourself, no matter how restrictive or lofty, you
assign a moral quality to it. And, when you break that promise, the default feeling of poor discipline damages your
psyche and your relationship with finances. It could even ruin future prospects of appropriate money
management.
Managing money isn't always easy or even fun. Wealth management is stressful as it is – there is no need to turn it
into an internal character assassination.
Climbing Costs and Inconstant Income

Even with ironclad discipline, budgets don’t work from a purely practical perspective. Think about a typical budget
process:
 Monthly income: $5,000
 Mandatory bills (rent, utilities, car insurance, etc.): $2,500
 Food and groceries: $800
 Entertainment: $500
 Student loans: $450
 Remaining $800: advance loan payment or savings
That looks great and could make you feel you have a clear path ahead. But it's never that simple. By assigning a
fixed, or even variable percentage, authorized spending amount to a category, you ignore the rules of reality.
Finances are never consistent. One month you may need to spend a lot for a flight, but the next month is quiet,
and you can sock away more. Or you have an unexpected car repair or another emergency that throws you off
your rigid allocations. Income fluctuates, too, especially if you're in an hourly or tip-centric profession, so even the
foundation of your budget is misaligned.
That's all true in the best circumstances. But when global inflation makes costs for the bare necessities skyrocket,
your budget is blown before it can even start. And like we've covered, that can lead to psychological torment and
feeling like a moral failure. Why do that to yourself based on circumstances entirely out of your control?
Alternative Answers
Even the experts agree that budgets don’t work. So what is the answer to paying down debt and saving for the
future while still enjoying yourself? The ideal solution is mindful spending. Like mindful eating or other mindfulness
activities, mindful spending means pausing before a purchase. Consider whether buying the item will help you
meet your goals and bring value to your life or if you're just getting caught up in a dopamine rush.
A good practice is to avoid snap decisions, wait a week, and then see if it’s something you still want to buy. This is
equivalent to taking a tiny bite of cake and waiting 10 minutes – chances are you won't want to finish the cake and
blow your nutritional progress. You likely won't want that new toy in a week, either.
You then couple mindful spending with money tracking, which may seem budgetary but isn’t. Instead, you’re doing
a retrospective on where the money went, not where it will go. This will help shape a mental picture that’s more
flexible than rigid budgeting and will help inform your mindful spending practices.
Mindful spending is hard, though. It's ideal, but many of us don't have the inclination, discipline, or even time to
actively consider each expenditure. Diane Money can take over from there.
Instead of focusing on financial restrictions, Diane Money focuses on goals. Already, Diane Money is flipping the
script on traditional budgeting by psychologically making intelligent financial decisions a step toward reward rather
than punishing restriction.
From the goals, Diane Money works backward with you to identify spending categories and even helps remind you
about upcoming bills. With enough data, Diane Money can help pin down sources of money drains to plug –
basically acting as a second brain to practice mindful spending for you.
Conclusion

If you’ve felt like a failure because you can’t stick to a budget despite the experts saying that budgeting is the key
to success, you aren’t alone. Budgets are never cut and dry because of cost and income variances. Trying to rigidly
keyhole yourself and your life into strict allocations is psychologically devastating.
Instead, look back on where you're spending, what's mandatory, and where you can trim the fat. It's more all-
encompassing, less rigid, and convenient for daily life. If that's too difficult, which it is for many? Let Diane Money
do it for you.

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