Budgeting forces a person to look critically at one’s own financial information —Eric Chen, associate professor at the University of Saint Joseph
Only 39 percent of adults say they have a budget and keep an eye on their spending, according to the National Foundation for Credit Counseling. And a recent Experian Consumer Services survey estimates that over 60 percent of holiday shoppers plan to shop for holiday gifts without a budget this year.
But neither of these surveys really explains why Americans seem to overlook budgeting. So the Deseret News talked to five financial and psychological experts about why they think people don’t budget.
1. Unresolved emotional issues
“People don't budget or stick to a budget due to unresolved emotional issues,” Eddie Reece, a therapist who specializes in helping people improve their financial lives, told the Deseret News in an email. “If our financial lives were simply about math, we'd all have plenty of money.”
“We have a relationship with our money just like we have a relationship with food,” he explained. And just like emotional issues can sabotage a resolution to lose weight, so too can emotional issues sabotage a budget, he said.
“Much of our behavior is explained by the drive to regulate how we feel,” said Reece. Some people drink alcohol, some people eat food and some people bury themselves in their electronics, he said.
“So it is with money,” Reece continued. “We spend it, save it, dream about it, (and) try to get more of it, all in pursuit of ‘feeling better.’ (But) the only reason one would want to feel better is they don’t like how they feel.”
However, Reece explained, “When you learn to experience your inner emotional world — the highs and the lows — in ways that aren’t distractions, you won’t be so driven to use an outside source to soothe yourself.”
Reece suggests first taking “an honest accounting” of your money, including every penny that leaves your pocket, and then telling someone close to you what you’re doing so that you have someone to be accountable to.
“As you keep track of your money, you’ll almost automatically make changes,” Reece said, “but you’ll be surprised at how difficult it is to keep an honest accounting.” Old habits die hard, after all.
While the truth may set your free, Reece says, it’ll only do that by upsetting you. However, it’s that discomfort that will be your incentive to shake up the status quo.
2. Meaningless numbers
“To make budgeting successful, it needs to be tied to what you want to do in your life,” Kevin Gallegos, vice president of the Phoenix division of the Freedom Financial Network, told the Deseret News in an email.
Instead of starting with numbers, Gallegos suggests starting with goals. “Maybe the goals range from saving on weekly grocery bills to taking a family vacation to Disneyworld,” or even “making sure you have time to train for a marathon,” he said. “Write them all down, and then build the budget with the goals in mind.”
It’s OK if your budget needs modifications along the way, he explained. You just need to know where you’re going.
“In some respects, answering the question of why people don’t budget is a lot like the question of why we don’t go to the gym every day,” Eric Chen, associate professor of business administration at the University of Saint Joseph in Hartford, Connecticut, told the Deseret News in an email. “We all know it’s good for us, but sometimes, there just isn’t enough force to drag us there.”
“Budgeting forces a person to look critically at one’s own financial information,” said Chen. “Looking in the proverbial mirror isn’t always easy.”
Instead of a one-time process, budgeting takes continual upkeep, he said. “It’s a continuous process of planning, feedback and adjustment.” After you’ve looked back at what you’ve spent, made goals for the next period of your life and executed your plan, you have to do it all over again, and the repetitive process “feels a lot like sticking to a diet,” said Chen. It’s something that “requires discipline.”
For people to budget, Joseph R. Sanok, a counselor at Mental Wellness Counseling, told the Deseret News in an email, “The goal has to be more compelling than the immediate purchase.”
“When we see the immediate reward of a purchase,” Sanok said, “our brains light up with endorphins (i.e. happy chemicals). When we budget, we don't get the same high.”
“However, when individuals set up systems that give similar reward cues to the brain, it can mirror those same chemicals,” said Sanok.
For example, you could pay off your small debts or work on short-term budgeting goals. “Small goals that are short-term use the brain's natural reinforcement system,” said Sanok.
Of course, you don’t want to ignore the big stuff. But having a few little wins under your belt could help you gather momentum.
“I think people have a lot of misconceptions about what it means to budget,” Stephanie Genkin, a financial planner who teaches budgeting workshops at the Brooklyn Public Library, told the Deseret News in an email. Instead of meticulously planning each purchase you make, Genkin believes that budgeting is, at its core, knowing how much you need for the essentials, setting aside money for your monthly debt payments and saving for your retirement and that inevitable rainy day.
“Then the rest of your income is yours to spend anyway you like,” said Genkin. “The only trick is that you have to keep track of that amount as you go through your month. Roughly 30 percent of your monthly after tax pay is yours to enjoy. But when you've spent it, the party's over until the next paycheck.”
“In most cases, a change of habit or two is all it takes to get a budget under control,” said Genkin. “People who prioritize and plan their expenses know what they can afford to spend on life’s little treats — which is all budgeting really is.”