A Better Way To Budget

For many people, making a budget — and trying to stick to it — is one of the most frustrating experiences of day-to-day life.

But in an article on the Science of Us website, Brad Klontz, a psychologist and certified financial planner, says the main problem with budgeting is its approach.  “I think the entire concept of budgeting is flawed,” said Klontz.  “Your emotional brain responds to the word budget the same way it responds to the word diet.  The connotation is deprivation, suffering, agony, depression.”

According to Klontz, the word diet suggests famine, which is enough to provide short-term motivation.  But in the long term, that motivation breaks down.  Researcher and University of Minnesota professor Traci Mann explained it this way in “Why Diets Don’t Actually Work” in the Washington Post: “[Food] 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.”

Klontz says budgets work the same way because instead of thinking about what you want, you’re thinking about what you can’t have.  A budget implies scarcity, and it’s our instinct to overcome that scarcity the best way we know how: spending money.  Klontz’s suggestion is to work with your psychology instead of fighting it.  He recommends a “spending plan”, which is a different way of thinking.  A spending plan would focus on goals, not deprivation.  Think about what you value and enjoy, and get as specific as possible.  Then build a plan to reach your goals by figuring out where the money will come from.  A spending plan is very similar to a budget in implementation, but it’s a more positive approach.  And psychologically, a plan that focuses on supporting goals suggests you have more control, and that can be a big motivator.   “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 said.

The article is entitled “The Annoying Psychology of Why You Can’t Stick to a Budget” by Kristin Wong, and can be found at http://nymag.com/scienceofus/2017/05/the-annoying-psychology-of-why-you-cant-stick-to-a-budget.html? .  The photo came from that site.

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