4 Reasons Why Traditional Budgeting is Broken
Read Time: 3 Minutes
Fuck budgets. They suck, and we all know it. They are outdated and ineffective.
Yet despite our hatred for them, we have all budgeted before. Or at least tried. That’s because we all know that in order to become financially independent, we must save our money. And traditional budgeting is the only way many of us have been taught to save.
This article is my 1st part of a series on how to save money. Today, we’ll start with the 4 biggest reasons why traditional budgets fail.
Let’s get to it.
1. Budgets are Time-Consuming & Tedious
This is the most obvious, but also the biggest reason why many people give up budgeting after only a few short weeks.
I know I’m not alone in the emotional budget rollercoaster. One day I will be determined to make a budget and stick to it. I’ll download all the apps or make the coolest spreadsheet, and I’ll record every single thing I spend. Every coffee, every shopping trip, every night out. And then that enthusiasm fades, and it fades fast. Eventually, you give up entirely, and your budget, along with your hopes of saving money, evaporate.
I think my personal record is around 3 months. But it’s just unsustainable. Tallying up every expense is far too time-consuming and too tedious. The more difficult and monotonous a task is, the less likely we are to stick with it. From that perspective, budgeting seems doomed from the start.
2. Your Expenses are Not Black & White
Remember that restaurant you went to on Friday night? Is that a “food” or “entertainment” expense?
What about that Uber you took to the airport for your trip. Would you consider that “transportation” or lump it in as a “vacation” expense?
And what about last week’s ATM withdrawal? Where the hell did that money go?
These grey areas used to drive me crazy when I tried to budget. They always left me with a feeling of uncertainty. They also make it easy to fudge your categories. “Uh oh. I went over on my entertainment budget. Oh well, beer counts as food, right? I’ll just label it as groceries!”
When you find yourself trying to game your own system, you know something must be wrong.
3. Your Expenses Vary Month to Month
The only thing constant in life is change. That saying rings true for your living expenses also.
Nobody’s life is so routine that this month will look exactly like the last. But that’s how budgets force you to think. This rigid system doesn’t do well with life’s uncertainty.
Some months have holidays. Other months have friends visiting. Still others have emergencies. Trying to predict your expenses for the month is like trying to predict the stock market. And don’t get me started on that!
Budgets pretend that life is some regimented utopia where nothing changes, and then cause you undue stress because you went $5 over on your budget for the month. The point of saving money is to be financially free, not to be shackled by your tyrannical budget (Okay, maybe that’s a little extreme. But you get the point.)
4. Budgets Focus on the Wrong Thing
Why do we budget in the 1st place? To help us save money, of course. But there’s a problem with that.
Budgets make you focus on your spending, while ignoring the most important part of the equation, which is how much you save. That’s like trying to get in shape by counting the hours you spend OUTSIDE of the gym. Sound dumb? Exactly.
This backward mentality is my personal least favorite on the list. I don’t have the attention span to focus on things that aren’t critical, so I’d rather focus on saving, not spending.
Wrapping It All Up
If traditional budgeting works for you, that’s great. More power to ya. But you are in the minority.
Traditional budgets are time-consuming to stick with, force you to bucket your expenses into sometimes arbitrary categories, and don’t account for expenses that vary from month to month. But most importantly, they focus on the wrong side of the equation. Instead of paying attention to how much you are saving, they focus on how much you are spending.
But it’s not constructive to criticize something if you don’t have a better alternative. So stay tuned for my next article in this how to save series where I’ll cover the system I personally use to save money, and the tool I use to do it.
The conclusions drawn throughout this website are not advice meeting the particular investment needs of any investor, and they are not intended to serve as the basis for financial planning, tax, or investment decisions. This website is for informational purposes only and is not a solicitation or an offer to buy any product, service, security or instrument. The opinions expressed throughout this website are my own and not those of any company I work for.