Zooming out and looking at it from a greater perspective, it’s hard to argue anything against the concept of budgeting. Budgeting is critical for large corporations, healthcare industries, and the US government. (But for about two decades now, we’ve had a deficit, so the US government is probably a bad example of living below your means.)
If budgeting is essential for such large entities, it only makes sense for us to follow suit, right? Yes and No; because personal finance is, well, personal. I posit the argument that budgeting doesn’t work for long-term success—and I’ll go as far as to say that long-term budgeting is more detrimental than beneficial.
Here are my top three reasons why I don’t like them:
- They are too restrictive – No matter how much you set aside in one category, you’re bound to overspend at some point. (Why? Because life is complicated, and budgets don’t incorporate surprise expenses!)
- Budgets, in my opinion, are more geared toward “looking back” on money instead of “looking forward” because a working budget requires you to “best guess” your future expenses based on your past purchases. And although there’s nothing wrong with it in the short term, where does it get you in the LONG RUN? Nowhere, really. The problem with budgeting is that it doesn’t give you room to discover your MONEY VALUES because you’re constantly trying to “plan for the next month” And so, If you ask someone who keeps a strict budget—I bet they are very good at telling you line by line how much they spend on groceries or bills, but the SUBTLE difference is this: When you ask them where they want their money to go or where they want to be in a few years or even what their VALUES are through their spending the room gets quiet very fast because it’s one thing for someone to show you their spending line by line on items and it’s another to explain in detail what their SPENDING PHILOSOPHY is when it comes to money. And you can’t create your spending philosophy on “budgets.”
- People just don’t stick to them! They’re like diets. Budgets, like diets, are unsustainable because they eventually focus on “needs” and completely ignore our “wants.” Can you imagine walking into a bookstore and not buying a $10 book you want because “it’s not in your budget?” That’s such a limiting feeling! Or how often have you heard someone say, “I just want to create a simple budget so I can TRICK MYSELF INTO SAVING.” Can you imagine that—creating a budget so you can “TRICK YOURSELF” into saving money!! Of course, we get creative and invent games to stick to budgets. But long-term, this kind of argument falls flat for long-term wealth creation.
Budgets: More harmful than Beneficial?
Setting up a budget for a category seems relatively innocuous, but what happens when you have money left over at the end of the month? So often, we convince ourselves to continue to spend it even if we don’t need to. Why? Because it’s already in our budget!
For example, a budget of $500/mo on clothing ENCOURAGES you to spend the total amount even if it’s unnecessary. Therefore if you’re a spender who frequently sees a gap between your allowed spending and your actual spending, this opportunity provides another incentive to spend! How wild is that! Spending just for the sake of spending!
Okay, so what’s $exier than budgeting?
I value simplicity. After all, as the saying goes, simplicity is the ultimate sophistication. I prefer to AUTOMATE and TRACK my spending. I don’t enjoy creating budgets or sticking to them, BUT I think they have value and importance, especially in the short term. Months and even years living on a budget enforce good long-term money behavior, and what’s ultimately important is that this experience allows you to develop a sense of your overall saving and spending habits.
Budgeting is like using training wheels when first learning to ride a bicycle. Once you’re experienced enough, those training wheels should come off because, at that point, they’re not only irrelevant but having them on actually delays you from reaching your goals. Automating, spending mindfully, and tracking your finances means you have a vision for your money, allowing you to reach your goals more quickly. Of course, budgets will only take you so far but if you need to hit the breaks on your spending for some time and get your finances in order, then, by all means, make a budget! Budgeting can be reasonable and sometimes even necessary because a budget can convert a silly spender to a smart saver. —and this is good, but it’s not $exy.