Is budgeting a waste of time? When I first came across this question, I thought pfft, of course not, budgets are the most useful thing ever!
So why did this CNBC Make It video argue that budgets are a waste of time?
What is the biggest problem with budgeting?
In the video, senior money reporter Kathleen Elkins together with experts Ramit Sethi, David Bach and Grant Sabatier argued that a budget is not really necessary.
However, all of them still advocate for budgeting strategies:
- Tracking expenses (to know approximately how much you spend on different categories every month), and
- Set up automatic savings (set up monthly deductions then spend the rest of your salary, guilt-free)
After hearing their thoughts, I see the problem. When they say budgeting is a waste of time, what they actually mean is strict, restrictive method of budgeting is a waste of time. The kind where you just give yourself RM10 a month on fun when you usually spend RM300.
In this case, then yes, I agree. Strict and restrictive budgeting is almost impossible to stick to, it’s not worth doing at all.
Why is it so hard to stick to a budget
The experts are right in pointing out some disadvantages to budgeting, and why it is so hard to stick to a budget.
Ramit Sethi said that (strict and restrictive) budgeting sets you up to fail from the getgo, because despite the best efforts to keep spending within the allocated budget, most people will overspend on some categories (because life happens). This causes guilt, so people will give up.
David Bach has a similar opinion and likens (strict and restictive) budgets to diets, where people start off super optimistic but tend to fall off the wagon after a few months.
What is the biggest problem with budgeting
According to Grant Sabatier, the biggest problem with budgeting is when people spend so much time and effort to cut out a few dollars here and there. This reinforces scarcity mindset (instead of abundance mindset).
This makes sense. (Strict and restrictive) budgeting where one obsesses over finding and getting the best deal possible to save a dollar is a waste of time. Not only will you lose valuable time, there is also a limit to how much money you can save.
So, is a budget really necessary?
To me, all these just reinforces my belief that budgeting is NOT a waste of time. You just have to make sure you don’t fall in to the diet version of budgeting, the strict and restrictive budgeting.
Instead, one should redirect their efforts to:
- reduce Housing, Transportation and Food costs as low as possible (without sacrificing health and happiness), and
- eliminate expenses that are not important nor meaningful to your lives, so you can reallocate the money to things that do give you joy*, and
- focus on earning more instead
*Ramit Sethi uses the term conscious spending plan.
How budgeting changed my life
I’m not even kidding when I say budgeting changed my life. Like many people, I felt overwhelmed by the sheer number of things I’m told I have to do, if I want to reach my financial goals.
Think about it – I’m expected to save money AND earn more money AND invest my money AND diversify my money AND get insurance AND do estate planning AND… it’s enough to scare anyone, especially if they’re just starting out.
But the budgeting strategy tracking my expenses was simple enough, and that’s what I did to kickstart my financial journey, and suddenly the momentum is there. It gave me back that sense of control. Now I don’t wonder what I spent on, I *know* what I spent on.
I love the process of monthly reflection, where I look back on expenses and decide if a particular spending was worth it, or the purchase was just spent because I was in a bad mental state (angry, sad, etc).
That, together with learning how to spend money for max happiness, and focusing on earning more have improved my relationship with money so much. I no longer want to spend on things that I don’t care about, nor be restricted by an amount.
I’ll end here. If you’re doing the strict and restrictive type of budgeting, you might be setting yourself up for failure, so you might want to try something else. Hope this post will help you improve your budgeting strategy, going forward, all the best 🙂