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budgeting methods don’t work

the psychology behind budgeting methods and why they’re so hard to stick to

Just seeing the word budget can send shivers down your spine 🤢 Budgeting is often considered Money 101. It’s the easiest and first way to be good with money, right?? Well if that’s the case, then why are budgeting methods so hard to stick to??? Here are three key things to know about the psychology behind budgeting:

  • Emotion plays a huge role
  • Anxiety and avoidance can create an endless cycle
  • The need for consistency sabotages your budgeting

1. the challenge of consistency

Budgeting, in theory, seems straightforward. You set a plan, allocate your funds, and voila! Except, budgeting often relies on the art of consistency. The issue here is the clash between the idealised concept of budgeting and the unpredictable nature of life.

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And what’s more unpredictable than our own brain? Emotional spending, influenced by stress, anxiety, boredom, or even social pressures, can sabotage consistency. On top of that, life is hard to predict, filled with unexpected expenses, temptations, and the constant pressure to live up to idealised versions of life we see on social media. 

It’s easy to perceive budgeting as a rigid set of rules. The term budget itself can trigger a defensive response from our brain. You’ve probably got this very clear picture of what budgeting looks like. And I bet it’s not happy smiles and a vacation to Mallorca. It's important to remember that a budget can be flexible. Because let’s be real, life is fluid, and so should be your approach to budgeting. Rather than viewing it as a set of constricting rules, consider it as something that evolves with your circumstances. No pressure, just vibes.

monopoly opportunity card

Another major challenge is the clash between short-term wins and long-term goals. Instant gratification can undermine consistency. But the thing is, it’s important to give yourself these small wins so that you don’t burn out on your journey towards your goals. The journey towards financial wellbeing is not a strict or linear path. This acknowledgment sets the stage for a more realistic and sustainable approach to consistency. A definition of consistency that works for you.

3. emotional influences that impact your budgeting decisions

The most significant emotions in relation to money are fear, guilt, and envy. At Good With, we’re building the tools to help identify and overcome the emotions that are especially tied to money for you. Because, without us even knowing, these emotions override rational thinking and unconsciously drive actions. 

What’s there to be afraid of? The possibilities depend on the individual. But common fears include the fear of missing out (FOMO), fear of finding out (FOFO), fear of not having enough, the fear of looking stupid, and the fear of being exposed.

Guilt is one of the most common and powerful emotions associated with money and personal finance. It’s a prime reason people avoid doing what they know they should. It's natural to want to avoid exposure in relation to something you're ashamed about. Guilt interacts with avoidance to create a vicious cycle. When you’re filled with guilt or shame, the natural tendency is to avoid facing whatever is making you uncomfortable. That avoidance itself leads to additional shame and more avoidance. 

🧠 Learn more about hidden bias in-app here

People who avoid tackling financial necessities often label themselves procrastinators and assume they’re just lazy or undisciplined. Spoiler alert: they’re not. The psychological dynamics of avoidance underlie what we tend to call procrastination. We’re hard-wired to deploy various kinds of avoidance manoeuvres when encountering something that is anxiety-inducing or uncomfortable. The tricky thing is that in the very short run, avoidance works to reduce anxiety. Because it works, you’re inclined to do it again and again.

🧠 Learn more about fear in-app here

And then, there’s envy. In this day and age, it’s practically impossible to avoid. A social psychological phenomenon known as FOMO, social media portrays romanticised versions of life that never show the full picture. Beyond social media, seeing friends or family going on that killer holiday to Bora Bora can naturally leave you browsing flights without thinking too much into it. 

🧠 Learn more about social influence in-app here

3. the art of gaslighting

The fundamental issue with budgeting lies in its approach. The very concept of budgeting is inherently flawed. Your emotional brain reacts to the term budget much like it does to diet. The association is one of restriction, stress, micromanagement, and ultimately just bad vibes all round. This is known as loss aversion:

the tendency to inherently focus on the pain of loss

It’s not a you-issue either, it’s what we as humans do best (aka assume the worst, like, all the time). Instead of thinking about what you want, you’re thinking about what you can’t have, whether it’s a cheeky coffee on your way to uni or a night out. A budget implies scarcity, and it’s our instinct to overcome that scarcity the best way we know how: splashing the cash. Cue: present bias

the art of prioritising immediate rewards over future benefits

And when you consider your mental health, it’s only natural to feel the need for instant gratification to boost your spirit! It can even be a good thing to treat yourself, when you can.

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So, to budget effectively is to focus on your wellbeing. Work with your psychology, rather than against it. Taking a goal-oriented approach can help reframe your mindset. Say you set a goal to take a trip to Paris in 2024, build a plan to save for that goal and crunch the numbers (or watch the Good With app do the maths 😎). Figure out how you’ll move around your money to make it happen. This approach focuses on supporting your goals, which reframes you as the one in control over your financial situation, and even a small sense of control can be a huge motivator. Get excited about things you want to spend money on, and you’ll naturally want to cut back on the things that don’t matter so much.

💸 Set a budget in the Good With app

it's your money, own it

It’s not that budgeting methods completely suck, it’s just that they traditionally don’t consider our mental health and wellbeing. We’re humans, not machines. Emotion isn’t all bad. It tells you what you’re passionate about, what really matters to you. It makes you feel alive. It gives us the little wins and pick-me-ups when we need them most.

We have perceptions about so many things, like budgeting being a lot of work, that are shaped by our childhood experiences and messages we've absorbed throughout our lives. Whether you have these negative associations by nature or nurture, you can set small, task-specific goals. The key is self-awareness. Much of our emotional world is unconscious. But if you know what to look for and have a blueprint for the kinds of emotions that can influence your personal relationship with money, you’re on the right track to being good with your money, your way.

fancy a money detox?

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