If You Want to Save Money and Transform Your Finances, Stop Making Budgets

For the longest time — and still to this day — making a budget never worked for me. Every time I tried, I would spend a few hours making a fresh budget only to completely forget that budget existed by the end of the week. Months later, I would discover my failed attempt and berate myself for not getting it together yet again. Many times, this would spawn another failed attempt at making a budget.

I‘m not the only person who suffers from a chronic failure to budget. Judging by the amount of self-help content that exists for personal financial planning, I’m guessing most people also fail to budget.

Professionals will tell you this is because we’re not adulting properly. According to them, we need to get responsible, get it together, and start living on a budget, or we’ll never have control of our financial lives.

I think most people fail to budget because budgeting sucks.

Why Budgeting Sucks

Budgeting creates a mindset of restriction, not a mindset of growth

My first big problem with budgeting is the attitude of restriction it creates in the mind. People who are on budgets say things like, “I can’t go out to eat with you; I’m on a budget.” They deprive themselves of things they want for the sake of staying true to their budget.

It reminds me of the way people act when they’re dieting. They still want to eat all the same food they usually do, but they deny themselves for the sake of their diet.

Science has all but proven diets don’t work because they create an attitude of restriction. Most people who go on diets not only don’t lose weight, they end up gaining more weight! When their diet crashes and burns, they end up eating more high-calorie foods than they would have if they’d never even tried a diet in the first place.

Like going on a diet, going on a budget creates an attitude of restriction. People on budgets think thoughts like, “How can I make do with less?” and “How can I cut these expenses?” Phrases like “make do” and “live without” create fear, not growth.

Budgeting is a top-down solution to a bottom-up problem

My second big problem with budgeting is that it’s a top-down framework-based solution to a bottom-up process problem. Attempting to solve bottom-up process self-improvement problems with top-down methodologies has always struck me as foolish and doomed to failure.

If that didn’t make sense to you, here’s what I mean:

A bottom-up problem, or process problem, is a problem resulting from a thousand tiny decisions we make in our day-to-day life.

• Being overweight is a result of a thousand tiny decisions to eat more calories than you burn, made over a thousand different days.
• Chronically spending more than you earn and getting into debt is the result of a thousand tiny decisions to spend your money on things that aren’t worth it made over a thousand different days.

A top-down methodology or framework is an attempt to fix those thousand tiny decisions with one overarching method.

• Dieting is an attempt to change each tiny food decision you make by asking yourself if you have enough calories left in the day or if the food otherwise conforms to your pre-planned diet.
• Budgeting is an attempt to change each tiny money decision you make by asking yourself if the expense conforms to your pre-planned budget.

Instead of using top-down solutions, self-improvement problems are usually best solved with a bottom-up solution.

A bottom-up solution doesn’t create an external framework to which you must compare yourself. A bottom-up solution changes the way you approach the one thousand tiny decisions that got you here in the first place.

• Mindful eating teaches you to pause before eating and ask questions like, “Why am I eating? Am I hungry, or am I eating because I’m hurting inside? Am I eating something that will make me feel good? Or will this food make me feel bad?” People who learn to eat mindfully often lose weight without watching what they eat because they lose most of their desire to eat bad food in the first place.
• Making a spending plan teaches you to pause before spending money and ask questions like, “What are my dreams? How can I spend money to make those dreams come true? Will this purchase help those dreams come true?” People who make spending plans find it easier to save money because they find they naturally lose the desire to spend their money in the first place. You might think of it as mindful spending.

A top-down solution attempts to make your desires conform to an external framework. They create a tension between your desire to stick to your diet and your desire to eat that muffin. A bottom-up solution challenges you to introspect in a way that shapes what you desire in the first place.

Throw Away Your Budget and Make a Spending Plan

A spending plan is the opposite of a budget. Where a budget challenges you to “cut back,” a spending plan invites you to spend on what really matters.

Making a spending plan begins with knowing what your dreams are. You can’t determine what you want to spend money on if you don't know what you want out of life in the first place. Your dreams might include…

1. Traveling the world.
2. Living in a beautiful, clean, and inviting home.
3. Starting your own business.

Your spending plan is your plan for how you’re going to use your money to make these dreams come true. Someone with the above three dreams might put these line items on their spending plan:

1. Plane flights and hotel accommodations
2. A down payment on a home
3. Home improvement equipment
4. Gardening equipment
5. Savings to live off of while founding the business
6. Books and educational resources for entrepreneurs

The true magic of making a spending plan happens during this step. You’re treating your finances like you’re starting from scratch using a skill Buddhists call beginner’s mind and inviting yourself to imagine what’s possible.

As you make your spending plan, you will be as surprised by what’s not on your list as what is. For instance, my failed budgets almost always restricted the amount of takeout I could order because “takeout is expensive.” Still, my spending plan makes plenty of room for takeout because I realized takeout helps me stay healthy when struggling with illness. But clothing and books, two categories that always had room on my budgets, ended up with no space on my spending plan because I realized spending money on those things did not get me closer to my goals.

A budget asks you to look at your current expenses and see if you can cut them down. You’re only choosing from what you’ve spent money on before, a narrow choice indeed. A spending plan asks you to look at the whole world, everything in it, and decide which things are worth your dollars.

Spending plans also create the expectation that you should spend your money. If you come in under a budget, you deserve a reward, but if you come in under a spending plan, you fucked up. Not spending money on what you do want is just as bad as spending money on what you don’t want.

How to Make Your Own Spending Plan

It’s easy as pie. Start by picturing your perfect life. The one where you’re married to your dream spouse, sitting on a porch swing in the summer sun, enjoying your day off from your dream job in your dream city. Your little dream children are running around in the yard (if you’re into that sort of thing), and you’re talking eagerly about all the dream projects you’re going to start and the dream goals you’re going to achieve or already have.

Ask yourself what expenses are required to live those dreams.

My dreams have always included traveling through nature to see great mountains, oceans, and natural wonders. Spending money on travel-related expenses is a necessary part of that dream, so travel expenses are part of my spending plan.

My dreams, though, don’t include fashion. Once such a priority of mine, being trendy and in fashion is no longer something I care about in the slightest. After realizing I could take a weekend road trip for the same amount of money I would occasionally spend on an outfit, I summarily decided fashion isn’t worth anything close to what it costs. Clothing expenses are not part of my spending plan.

Long-term financial goals should be factored into your spending plan. If you dream of retiring in comfort or being financially independent, make space for savings and retirement contributions on your spending plan.

Once you’ve made a list of all the spending that is part of your plan, you can map your spending to your income. I was lucky; everything on my spending plan, added together, ended up being less than what I make most months. But if you find your original spending plan calls for more money than you have, ask yourself these questions to help winnow down what’s most important.

• “What will happen if I don’t spend according to this plan?” Answers range from “Oh, no big deal, I guess,” to “Everything would be ruined.” Let the least important expenses go first.
• “Is there a cheaper way to get the same result?” Books are not on my spending plan even though I value reading because I never have to spend money to read a good book, thanks to my local library. Spending money on books when I can get them for free from the library would be a waste.
• “Is this dream really a dream of mine?” For a while, I carried around dreams others had for me as if they were my own. Many of the things I did in my early twenties were attempts to make these imposter dreams come true. It was only later that I realized these dreams were never mine in the first place, making all the money I’d spent pursuing them a waste.
• “What can I put off until later?” Since quitting varsity golf in high school, I’ve wanted to make more time for the links. But I don’t have much money to spend on golf courses, nor do I have anyone to play with right now, so now is not the right time to act on that desire.
• “What will help me raise my income?” Expenses that help raise your income give you more money later to spend on the things you put off. Examples include paying off credit card debt and investing in further education.

Use questions like these to whittle down your spending plan until it is on par with your income, and then you’re done.

The power of a spending plan lies in how it changes your thoughts. Now, when I see a dress I like, I don’t ask myself if I can “afford” it. I ask myself if buying this dress is going to help move me toward any of my dreams. I may try to rationalize why it does, but my spending plan — and its $0 allowance for clothing — reminds me it will not. At that point, my desire to buy the dress begins to drain away on the spot. It’s a lot easier to save money when you do not have to exert willpower every minute of the day to do so.

Budgets challenge you to see how you can cut expenses while maintaining the same lifestyle. Spending plans invite you to consider what life could be like and how you could spend your money to make that happen. Achieving my dreams? Spending my time and money the way I want? Sounds a lot better than living on a budget to me.

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