Why You’re Wrecking Your Budget, And How To Fix It
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“It’s all my fault.”
“I suck with money.”
“I can’t stick to a budget to save my life, much less keep a budget for the whole family.”
Have any of these thoughts ever crossed your mind? If so, I have good news for you.
It’s not actually your fault.
It’s your budget’s fault. The problem isn’t with you. The problem is that you don’t like your budget.
Let me explain.
Budgets Are Like Health Food
Lots of people try to lose weight and get healthy. They try low carb, no carb, Nutrisystem, vegan, Atkins, Mediterranean, paleo, Weight Watchers, etc. Some people get healthy, but most don’t.
Ultimately, they all fail for the same reason. It’s not a lack of self-control. It’s simply the fact that they just don’t like the food. They like ice cream, bacon and Sister Schubert rolls better.
If spinach tasted like ice cream, we’d all eat salads every single day.
The same thing is happening with your budget, whether you know it or not. You stop budgeting because you just don’t like your budget. Not because you suck with money.
Long-Term Enjoyment Is The Key
People who lose weight and then stay healthy for life don’t just suppress their desires forever. They aren’t incredible people with super-human willpower. Instead, they find healthy food that actually tastes good.
Thousands of people will lose weight and then gain it all back (and often more) within a couple of years. This happens because they never found healthy food they enjoyed. Instead, they lost weight by suppressing their true desires.
But eventually, they gave in and the weight came back.
If you want to stay healthy, you have to find healthy food you enjoy. If you want to be good with money, you have to find a budget that you enjoy. Otherwise, you’ll never stick with it. You might for a few years. But you’ll be miserable and eventually, you’ll break.
Your Budget Doesn’t Taste Good
You’re picky. You don’t like brussels sprouts, cauliflower or budgeting.
Just like different diets, people have all sorts have different budgeting techniques.
Some folks have a cash only budget while others use credit cards. Some people will use an envelope budget system, while others take the anti-budget approach. Still, there’s another group of people who don’t budget at all.
Some of these systems work for some people.
For example, my wife and I use an envelope-like software called YNAB and it works well for us. Personal Capital is another program that helps you do a lot of the same things.
But will one of these systems work for you?
Answer: I don’t know… Which one do you like?
That’s the only one that matters.
Most people set budgets that help them cover necessary expenses, a few of the things they want and future savings. They start out super ambitious, go hardcore frugal and then end up hating their life because the budget feels so restrictive. They get through one day or one month, but eventually, stop because it’s too much.
If your budget feels restrictive, it’s set up wrong.
So how do you make a budget that you actually like? How can you get a budget that you want to follow?
Figure Out Your Real Wants
Most people understand the difference between needs and wants. You need food, water and shelter. You don’t need the candy bar in the checkout line at the grocery store. We learn this as kids with our mom at Walmart. When you said “mommy, mommy, I NEED this,” you were promptly told you don’t NEED it, you WANT it.
Once our basic needs are taken care of, everything else is technically a want.
Most of us look at needs and wants but never analyze the different levels of intensity we have for different wants.
That’s where we mess up.
A good budget helps you get those REAL WANTS. But most of us don’t budget that way.
Here’s how you likely do it:
- Car Payment/Transportation
- Stuff for kids
- Stuff for pets
- Unexpected life things
- Miscellaneous fun purchases you make without thinking much about them
- Real Wants
Here’s a nice little pie chart showing the typical breakdown.
Of course, you don’t like it!
Your REAL WANTS only make up a tiny little portion of the pie! If you only got to eat ice cream once per year, you wouldn’t like eating healthy either.
So how do you increase the REAL WANTS part of the pie?
Glad you asked.
How To Get Clear On What You Really Want
Before you can increase spending on your REAL WANTS, first you have to know what they are. In reality, you need to know the underlying outcomes behind them.
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Let me explain.
When you buy a pair of pants at the mall, you’re not actually buying the pair of pants. Instead, you’re buying “looking good.” You want to feel like you look good and those pants make you feel that way. So you buy them.
When you buy a large home, you’re not actually buying a large home. You’re buying space for family and friends. You’re buying comfort and the feeling of relaxation. Or you might be buying a feeling of pride, ownership and responsibility.
But the thing you think you’re buying isn’t what you’re actually buying. Ultimately, it’s the outcome you care about, not the thing itself.
To get super clear on your wants, you need to make a list of all the outcomes that are important to you. Here’s part of my list, in no particular order.
- Time with family
- Health and physical strength
- Time with friends
- The taste of good food
- Sense of independence
- Happiness and love from pets
- Sense of adventure and exploration
- Feeling of wonder
Then I want you to write down a list of purchases that help you achieve those outcomes. Again, here are a few of mine.
- Time with family <—- Eating out, comfortable house
- Health and physical strength <—- Gym membership
- Time with friends <—- Eating out, comfortable house
- The taste of good food <—- Eating out
- Sense of independence <—- Large emergency savings
- Happiness and love from pets <—- Pet insurance, vet bills, pet food
- Sense of adventure and exploration <—- Travel, flying, camping gear
- Feeling of wonder <—- Travel to new places
As you can tell, I like to eat out, spend money on my pets and travel. Having a huge home isn’t super important to me. But having a space big enough for a small group of friends or family is.
The first step to creating a budget that you like is getting super clear on your REAL WANTS and the outcomes associated with them.
Application To Real Life
After you’ve come up with your core outcomes and made a list of an example purchase for each, next you’ll need to analyze your monthly budget.
This where the rubber meets the road.
You must go through your monthly spending and ask two questions about every single purchase.
- Does this purchase help me achieve a REAL WANT?
- What outcome does this help me get?
If it doesn’t help you reach a core outcome, cut it. Which is tough. It may be as small as stopping your weekly Chipotle run or could be as large as downsizing your home because you don’t REALLY WANT that much house.
The beautiful thing is that when you start questioning every single purchase and see how it plays into your overall wants, you’ll naturally stop spending money on the garbage that you only kinda want. Which leaves more room to spend on the stuff that really matters to you.
At the end of the day, a budget is only good if it works for you. But it will only work for you if you like it. So create a budget that helps you save for retirement, pay down debt and do fun things because it’s what you REALLY WANT, not because it’s something you’re supposed to do.
When you do that, you’ll actually start sticking to your budget.
Nick True is a married twenty-something from Tennessee and father to three fur-children. He’s a professional writer and specializes in personal finance for Millennials. Nick loves helping people create a personal plan with their money, based on their own tendencies and emotions, via his website, Mapped Out Money.
John is the founder of Frugal Rules, a dad, husband and veteran of the financial services industry whose writing has been featured in Forbes, CNBC, Yahoo Finance and more.
Passionate about helping people learn from his mistakes, John shares financial tools and tips to help you enjoy the freedom that comes from living frugally. One of his favorite tools is Personal Capital , which he used to plan for retirement and keep track of his finances in less than 15 minutes each month.
Another one of John's passions is helping people save $80 per month by axing their expensive cable subscriptions and replacing them with more affordable ones, like Hulu with Live TV.