Here’s why budgets don’t work for a lot of people – CNBC

December 12, 2021 by No Comments

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If you’re interested in personal finance, you’ve probably heard the tried-and-true advice that budgeting is essential to achieving financial independence. We’re often told that if we don’t diligently track our income, expenses and debt each month we won’t ever get our finances in order.

It’s easy to understand why so many personal finance experts recommend budgeting: It’s a simple solution to a complex issue. By understanding your monthly inflows and outflows of cash, you can identify where you’re spending too much and cut down on those expenses, or you may decide to supplement your income with a side hustle. Budgeting is meant to force us to confront what we might not want to know, whether it’s that we should have opted for a studio apartment instead of a one-bedroom, or that we really just need a new job with higher pay. 

If you’re hesitant to create a budget or if the thought of making one scares you, you’re not alone. A 2020 Intuit Survey of at least 1,500 people found that more than 60% didn’t know how much money they spent the previous month. If you’ve tried making a budget and you’re unable to adhere to it, it might not be your fault. Select spoke to a policy expert and a personal finance expert about why so many people fail at budgeting and what they can do instead.

Budgeting can encourage a restrictive mindset around money

For many people, budgeting can be similar to dieting. You might eagerly create a new budget or start a diet in the hopes of saving enough to go on vacation or shedding a few pounds, respectively. However, after you’ve slipped up by eating a slice of cake or by spending too much on a new winter coat, you might be tempted to tear up the budget or say ‘screw the diet’. 

The language around budgeting and dieting often have moral connotations: You’re sinful and gluttonous when you indulge by breaking the diet or overspending, and you’re self-disciplined when you can adhere to strict spending limits or calorie counts. If you fail to stick to your budget or diet, it can often feel like a reflection of your character. 

“Budgets don’t work for many people in the same way diets or one-size-fits-all eating approaches don’t work long term. Instead, I believe that finances are personal. In the same way that it’s not about dieting but …….



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