Last holiday season, money was very tight in our household. We bought a new home in September, and the costs of moving, hosting Thanksgiving dinner and a family photoshoot really added up. On top of those big expenses, I resigned my full-time job in May and I was just starting to freelance. At the time, a family budget was pretty much non-existent.
To make sure we had enough saved for Christmas presents, I decided to download a budget app and get serious. I tried out a free version of the Fudget app, and while I found it really easy to use, I also found it almost impossible to stick to the budgets I had set up for us. Even if I went just a little bit over budget, I felt stressed and demoralized. I was starting to feel like my whole life was going to revolve around budgeting and deal hunting.
Why oh why is budgeting so hard? Why are budgets so hard to stick to? Turns out, science has the answer—and it makes total sense.
The Psychology of the Budget
“I think the entire concept of budgeting is flawed,” Brad Klontz, a psychologist and certified financial planner told Science of Us. “Your emotional brain responds to the word budget the same way it responds to the word diet. The connotation is deprivation, suffering, agony, depression.”
Ah ha! What I was feeling when trying to stick to a budget was not unlike what someone feels when dieting. Research shows that physical and financial health are connected, and they’re both hard to stick to for similar psychological reasons.
Just like dieting, budgeting conjures up images of suffering, giving things up (good things, like donuts and shopping!) and making forced sacrifices.
And just like with a diet, a budget can be easy to stick with in the short term, but almost impossible in the long term.
Apparently, your brain can get behind the idea of suffering for a few days or weeks. But forever? No way.
When your brain is convinced that you’re depriving yourself of something, whether that’s money or food, you start to want what you can’t have. This makes sense to anyone who’s tried to cut carbs for any length of time (give me all the cookies!).
Instead of thinking about the real reason you’re budgeting (maybe you’re saving for an awesome new house that will make you super happy), all you’re thinking about is what you can’t have (a new dress from Amazon). The same goes for food.
“When you are dieting, you actually become more likely to notice food,” University of Minnesota professor Traci Mann told the Washington Post. “Basically your brain becomes overly responsive to food, and especially to tasty looking food. But you don’t just notice it — it actually begins to look more appetizing and tempting. It has increased reward value. So the thing you’re trying to resist becomes harder to resist. So already, if you think about it, it’s not fair.”
So what’s the best way to fight these feelings so you can budget and save effectively?
Five Tips for Budgeting with Your Psychology
1. Change Your Approach
Create a spending plan focused on your goals, Klontz suggests. It may not seem that different from a budget, but supporting your goals by controlling your spending has a different effect on your brain. Add another layer by visualizing your goals. Save a picture of a beach vacation or a new car on your phone to motivate yourself.
In practice, a spending plan is just like a budget. But the way you’re framing it for your brain is totally different.
“You get really excited about things you want to spend money on. And then you want to cut back on the things that don’t matter,” Klontz told Science of Us.
2. Baby Steps
Make your goals manageable. Saving for retirement is so far away, it’s tempting to get a quick hit by spending on something fun now. Try to break up your goals into smaller milestones (like saving $300 a month) so you don’t get off track.
3. Plan For Your Missteps
Plan for overspending. Research has found that people tend to incorrectly estimate their monthly spending and are better at planning yearly because they pad it more. It’s also why I was down on myself for going over on my monthly budget plans. Work on understanding where your money is going and pad it upfront rather than making up for it later.
4. Visuals Are Key
Visualize your future self. A New York University study found that people who could visualize their future self saved more for retirement. You can take it a step further by thinking about what you want your retirement to be like. Having a better idea of where you want to live and travel or what you want to enjoy while retired will get you more excited about saving for those goals.
5. Snowball Your Debts
Psychology is full of all sorts of mind tricks that can help improve your overall financial picture. If you’re staring at several different types of debt, try to make the minimum payment on each account, then put all of your efforts into paying off the smallest debt first. This is called the snowball method. When you’re able to completely pay off one account balance, you can actually see your progress, which motivates you to keep paying off the rest of your debt.