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Bad Budgeting: When Good Intentions Fall Short

Life Goals & Milestones
Investing & Assets

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.

Is a budget really the correct answer in every circumstance? Or is budgeting just a buzzword that finance influencers use without helping their followers manage finances? Budgeting is general advice that doesn't account for the volatility of life, and it 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.

Climbing Costs and Stagnant 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 more complex. By assigning a fixed, or even variable percentage, authorized spending amount to a category, you ignore the rules of reality. 

Finances are never consistent. You can be saving and have built up a nice little account only to suffer a significant setback like a repair, have another major expense, or notice your grocery bill suddenly doubles because of rising global inflation. When costs for the bare necessities skyrocket, your budget is blown before it can even start. Luckily there's a better solution. 

Goal Setting  

Instead of focusing on budgets, focusing on goal setting may be more helpful. Consider where you allocate your resources and what you want to achieve. Then, work backward to identify spending categories that align with your goals. This approach is more flexible and less psychologically restrictive than traditional budgeting methods. Alternatively, tools like Diane Money can help you identify spending categories and remind you of upcoming bills to help you make mindful spending decisions without the rigidity of a budget. 

Take the monthly income from earlier. You have 5,000 and know any guaranteed expenses like student loans or mortgage payments. So add those up, and do the math to calculate your leftover expenses. Having a goal of sticking to the 50-30-20 rule works for both budgeting and goal setting, but when you use it as a goal-setting tactic, you can better align and track things that need to be given up or see where you can adjust your spending. 

Restrictive Mindsets Don't Work

We're all human; for many, restriction acts like a pressure cooker, building momentum to the point of spectacular excess that negates all the hard work it took to restrain oneself.

About 80% of restrictive diets fail, and budgeting is the same; both start with the best intentions, and that motivation leads to lofty, 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. You tell yourself you can have money if you avoid all daily pleasures that demand spending money. But, like dieting, you'll likely seize that dopamine hit and buy. The trend is so common it has an official name, revenge spending. Revenge spending is when someone says, "Oh, I've been denying myself for so long, and I deserve this treat!" unfortunately, just like a post-diet binge, one treat can become many, and suddenly, you've spent all on what you saved.

Rather than harshly restricting yourself, practice mindfulness and moderation. Find things you like to do and have within your budget. Come up with alternatives to the things you want to have. For example, if you absolutely love dessert coffees and can't live without them, try a cold brew concentrate instead to enjoy what you love for a fraction of the price. That's only one idea; come up with ones that fit your lifestyle! Don't limit yourself, avoid the binge, and provide enjoyment for your life. 


Budgeting may not always be the best solution for managing finances, as it doesn't account for the volatility of life and can be detrimental to wealth. Instead, goal setting and mindful spending can be more effective and flexible. Restrictive mindsets often lead to unsustainable behavior, so moderation and finding alternatives within one's budget are critical. Instead of restricting yourself in practice or funding, figure out a plan and spending method that works for you to meet your goals. 

Check out Diane Money to make your money work for you!

With Love,


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