Why We’re Bad at Sticking to a Budget

Photograph by Terry Travasso

It’s almost the end of the month and your credit card bill lands in your inbox. As you assess the damage, you quieten the reprimanding voice in your head. Your thoughts turn to the EMIs you’re yet to pay this month, the emergency fund you forgot to set up, and the tax filing you didn’t anticipate. Another email appears, announcing an end of season sale — you click, browse, contemplate; and against better judgement, you add to cart. 

Budgeting is a struggle for people across the world. It evokes such unpleasantness that we often quit the idea of budgeting before we’ve even made a budget. Rationally, we acknowledge the importance of a spending plan to track our income and expenses. It helps to manage cash flows better and efficiently allocate resources towards savings and investments. A budget gives you a holistic picture of where your money comes from and where it goes. Sounds like the solution to all your problems, doesn’t it? 

The thing about budgeting is that it sounds great in theory but is difficult to implement and sustain over a long time without an iron will and an almost Olympic discipline. You know what you should do (stick to the budget), but there’s so much to be enticed and entertained by. Indulging on impulse and losing track of budgets often leads to feelings of disappointment, shame, and hopelessness. The silver lining? You’re not alone!

Financial psychologist Dr Brad Klontz, in an article for CNBC, states that our brains are not wired to make sound financial decisions. Tracing our evolutionary history back to when humans lived nomadic lifestyles as hunters and gatherers, he explains, “Many of our chronic struggles with money make perfect sense when we picture ourselves in the environment for which our brains have been optimised — as a member of a small group of closely related migratory people in a world of scarcity and constant threat. […] They could only save what they could carry with them, and saving one of their most precious resources — food — was nearly impossible. It would quickly spoil. So, in evolutionary terms, it was much better for our ancestors to consume as much as they could as quickly as they could.” Intuitively, we are predisposed to consuming quickly instead of preserving for the future. Following through with a budget requires us to go against this instinct.

Since saving is a relatively new concept in the Anthropocene, we have to consciously resist instant gratification. So your goal could be to buy a car in a year’s time, but at some point your motivation may deflate and you might give into the temptation of buying yourself the new iPhone instead. With so many things grabbing our attention and tugging at our wants, it can be very tough to maintain self-control. Still, Dr Klontz believes that “overriding our natural impulses is needed to meet the financial demands of modern society, which require us to delay gratification, save money, and build wealth.”

In a pre-budget survey conducted by IANS in 2020, 65.8% of Indians said that they face difficulties in managing their daily expenses. Other surveys, as writer Anjani Trivedi points out in her column for Bloomberg, suggest that good financial health is closely linked to financial literacy, the levels of which are lower in Asia than in North America and the UK. Traditionally, Indians have veered towards hard assets like gold and property over more variable investments like stocks and bonds, and investing in these (more expensive) hard assets demanded more rigorous long-term financial planning to gather funds. Today, there is a generational shift in investing and motives for budgeting are also changing. Navigating these issues — by taking the onus to become more financially literate and inculcating a sense of discipline for budgeting — can prove challenging.

These days, with employment uncertainties on the rise and salaries reducing in value due to inflation, setting up a solid budget is essential for financial security — and it doesn’t have to be debilitating. Budgeting is a long-term, goal-oriented process that requires dedication, commitment, and discipline, but that doesn’t mandate punishing yourself in order to follow through with your plans. Starting small, going slow, and keeping wiggle room in our budgets helps us manage our cravings without losing sight of our aspirations. But most importantly, we must be gentler with ourselves.