Why A Budget Didn't Work For Me - Stepping Up to your Potential Podcast & Blog

Feb 23, 2018

After I had been tracking my expenses for a while, I decided to start creating budgets. That’s what you did, right? Every book I had said so. My thinking was that I could use the budget to help me curtail some of the extra spending I wanted to cut down on. Bear in mind that the bills, such a rent and phone and electricity etc, as well as the savings goals such as retirement and investments were all rather stable, accurate and fully funded. Where I was overspending and attempting to use the budget as a correction tool was in the discretionary areas, especially around entertainment and eating out. Unfortunately, the attempts failed over and over again. When faced with repeated failures, there are a few options available.

Keep trying. Maybe it’ll get figured out … one of these days. In the meantime, just suck up the sense of failure and defeat, and drive on.
Give up entirely. Clearly, this money thing is not my bag, baby.
Stop, regroup, and try something different.

For me, option 2 is a no-go. This way leads to bankruptcy court. Been there, done that. No thanks. And option 1, given enough failures, will eventually lead to giving up entirely anyway, so clearly that’s not the smartest route either. I eventually choose option 3. Alas, I am very hard-headed and stubborn so I stuck with 1 far longer than I should have.

My discretionary spending budget process was not particularly scientific or considered. I had in my head an ideal number that I could spend in various categories and that was the number I used. That number had nothing whatsoever to do with reality. See, I was using the budget as some sort of external control mechanism. The thinking was “I don’t want to spend that much on eating out, so I’ll just lower the budget and it will magically happen.” Magical thinking of this order is definitely not going to work here.

While one day voicing my frustrations with it, someone suggested I create a budget using my current, real spending rather than an idealized target. Unfortunately, when I’d do this then I’d also clearly see the larger-than-I-wanted number and have fits of anxiety before even getting started with the next month. I kept thinking “This isn’t a budget! This is a green-light to keep making stupid decisions!”

As a result of that mindset, I fought, and I do mean fought, for years against using my real spending as the template for a budget. Finally, something just snapped and I was ready to go from option 1 to option 3 and I said “fine, let’s it try that way.” So I set up my budget based on the real numbers, using averages of the last 12 months worth of spending to come up with realistic spending patterns in the problem areas. Not idealized “I’d like to spend this instead” valuations, but real world “this IS the average of what I truly do spend currently”. The hardest part of this entire thing? Getting over my own hoped-for ideal value and just seeing what was in front of me.

What happened actually surprised the heck out of me. Letting go of the idealized value and then seeing more realistic numbers on my tracking board ended up releasing a lot of the anxiety I had been feeling every time I looked at it. With this new system, for the first time ever I came in … under budget! Not by a huge amount, but a little bit.

This got to me to really examining what the heck was going on. Why did I suddenly reduce my spending without some external control forcing me to do it? I realized then that by using a much lower, unrealistic number was actually triggering a sense of lack or deprivation which was being rejected emotionally. So I’d go out to eat or by that trinket or that game value pack, just because I could. Having the contrast between the failed and successful attempts so recently in mind allowed me to clearly see that went I made decisions under the new system, it was done free of the low-grade resentment. I went from emotionally feeling “I’m gonna spend this money and you can’t stop me!” to feeling “Sure I *could* spend money on that, but meh. I don’t have to.”

For the first time ever, I felt a sense of success about the budget. But I also realized that this wasn’t a “budget” — at least not as I thought of one. It felt more like a spending plan. I changed the label on my tracking sheet from Budget to Spending Plan, and again the sense of anxiety lessened a bit more. What really started to get the ball rolling in a positive direction was turning my monthly tracking into annual tracking. In the annual system, I’d roll the monthly deficit or surplus over the next month and carry it forward for the year.

Say my fun-money budget is $500. If I spend $450, that $50 overage gets put into the “reserves” bucket. In the next month, I spend $525. Previously, I’d be beating myself up and making myself feel like a failure for this $25 overage. But when I take $25 out of the “reserves” … I still have $25 unspent! Suddenly the small monthly overages aren’t a cause for hair-pulling, and the small underages helped build breathing room into the overall process.

Gradually, by changing my mindset from deliberately Spartan “spending limits” to realistic “spending targets”, I was able to remove the emotional idea that my spending plan is a punishment. My budget was very definitely a punishment, at least that’s how I emotionally related to it. Without the punishment concept, the way that I related to the monthly and annual targets also began to change. It became a game to see how much under I can come. Why? Because at the end of the year, I decided that all the money in the reserves gets used for a larger fun vacation. For 2019, I’m thinking … Machu Picchu, or maybe sailing lessons.

Now that’s a fun, emotionally engaging reward that I can get behind and support. So my budget never worked for me. Why? Because I used it as an external control and as a mechanism to punish me for failing. Both of these approached provoked unhelpful, destructive emotional replies and further enhanced the problem. By changing the approach from “external control” to simply “this is where we’re at”, the punishment concept started to fall away and I eventually replaced it with a tracking system that has in-built rewards for exceeding expectations by spending less. Rather than having a budget that feels like a set of shackles, now spending plan inspires me. How does your money management approach make you feel? And how are those feelings affecting the results of your system?

TL:DR

I approached a budget as if it were a punishment, and emotionally responded by rejecting the limits I was trying to impose on myself. By changing tactics and approaches, I was able to create a spending plan that I could emotionally support and follow.

About the Featured Image

I stripped off the ancient wallpaper from this room. It was a hard tedious process, but I had to do it if I wanted to get to the rewards of a finished, beautiful room. Just as I had to go through the laborious, painful process of what didn’t work about budgeting in order to find what did. Look beyond where you are, to envision the end result that you’re aiming for.