I’m an avid reader of iHeartBudgets, and Jacob really does love his budgets. The tagline of his site is “Just because you make money, doesn’t mean you know what to do with it.” I’d even take that one step further and say, just because you’re a financial planner/blogger/investor/money guy/etc. doesn’t mean you know how to deal with money. But budgeting can be depressing, and it can create a cycle of depression if you’re not careful. And it can even lead some to avoid budgeting.
Budgeting Can Be Depressing
Budgeting can be depressing because if you don’t create a realistic budget, you just end up missing your budget – which can make you sad. For example, Jacob dives into Crystal’s Budget and tries to help her achieve her goals. However, one premise of her budget is that she needs to earn an extra $1,250 per month to make it work, which is 15% more than what she currently brings home according to the current budget. That is a big jump. And if she doesn’t make it, the rest of her budget will be off, and she will feel like she is drowning in her finances.
However, it’s not just the income side that can be depressing either. If you try to trim the fat too much on a budget, you will just feel sad because you can’t spend. It could get worse and you could feel trapped because maybe you’ve never cooked before, and your budget doesn’t include any money for eating out. So, now all you eat is undercooked flank steak because you don’t know any better.
Where Does a Budget Get You?
In the end, if you follow your budget to a “T”, you end up sad because you have a lot of money in the bank but feel like you can’t spend it. And then you worry about not following the budget and falling off the personal finance wagon.
A budget may have helped you achieve some intermediary financial goals (like paying off debt or saving for a vacation), but that is only if you budgeted for them to start with. Don’t plan on having any exciting memories of a spur of the moment trip.
How to Avoid Depression While Budgeting
The best thing you can do to avoid getting trapped in your budget is realize that it is a living document that needs to adapt to your current circumstances. It should almost be a goal sheet, not a “must do” sheet. That way you’re not trapped in your budget, but at the same time you can use it as a tool to help you going forward.
About Robert
I think you’re right in suggesting to think of a budget as a “goal sheet.” Those of us who are enamored with number may actually find budgeting fun. For the rest, budgeting’s merely tedious. To overcome the ‘tedium deterrent,’ focus on the benefits, both short and long term. And the main benefit of a budget is to make it far more likely you’ll reach your goals. That’s huge!
Good point on reaching your goals, but what if they really aren’t attainable in the short term? Wouldn’t you get tired of it after a while.
I think monitoring inflow and outflow is more important than budgeting. Assuming you’re paying your bills and money in is much greater than money out, it doesn’t really matter how you spend your money.
It’s only when you can’t achieve that state that you may need a budget to understand why. Even then it’s more of a postmortem than anything else.
Good point on it being more Jod an after-the-fact look as to why, rather than a future document.
Thanks for this perspective. Personally I love budgeting, but I agree with you it’s a living document. I think for those people who don’t enjoy the minutiae of budgeting and aren’t living beyond their means, it’s enough to auto-withdraw savings, have a nice EF/buffer, and keep an eye on the checking account bottom line. If you are living beyond your means, though, or working to pay off debt, I think it’s important to keep a strict budget until you’re out of that situation – even if it’s depressing.
But if it is too depressing, you may not want to follow it after a while, no?
Self-discipline. Gotta learn it sometime if you want to be successful in life.
I like it. A bit harsh but very true!
I knew someone would try to turn my tagline against me!
Thanks for the analysis, Robert, but I think there is some key information missing here that I don’t believe I highlighted in the budget I created. Crystal averages $10k a month in online income alone, but wanted me to create a budget for potentially only makeing $6k a month. She has never brought in that low of an amount since mid-2011, but likes to be conservative. Therefore, she is already making $4k “extra” per month.
It was just semantics in how she wanted the budget setup, so I called it “extra income.” If she lost that $1250 a month, she would still be able to pay all her bills, have fun money and save toward retirement. She had listed her goals as paying off both of her houses and maxing out her Roth IRA. So I stated that to hit those goals in the timeframe that she wanted, she would need to make $1250 more than the “minimum” of $6k per month (which she is already making more than that). Worst case, she still owns 1 house outright in a few years, and makes the regular payments on her second home. That’s not depressing at all!
As far as budgets being “depressing”, I believe that it would have been more depressing to tell her “sorry, you can’t hit your goals on your minimum income.” Instead, I showed her how she could hit her goals, by making the minumum amount + $1250 a month. That gives her a number to shoot for, and she’s already blowing that out of the water. Also, if you read the end of the budget analysis, anything left at the end is going toward fun money first, then more investing. I even added a “spedning cash” category to her budget that wasn’t there before!
I think not planning ahead and then wondering where all your money went is much more depressing than setting up a budget plan to reach your goals. Her goals were to own 2 houses outright before age 40 as well as max her retirement accounts. There’s nothing depressing about reaching those goals!
Now, I do agree with your premise that setting up a budget that’s to tight will always make you feel like you’re losing. I have done that in the past, and I regret it for sure. My personal budget is, as you stated, a living document that adapts to our changing priorities and circumstances. I even wrote about this in my post “what to do when you blow the budget”. You should never feel depressed with you financial plan, and if you are, figure out why and change it. If your budget keeps telling you that you are losing, then change it. Budgeting is a psychological exercise for sure, so you definitely need to set it up in a way that motivates you, not depresses you.
All that being said, I appreciate the concern about creating an unrealistic budget, and I want to assure you that I did no such thing. And, hey, I have an idea. Why don’t you send me your budget and I’ll put together my take on it, and you can let me know if it’s depressing or not. Whaddya say?!
I’ll think about it and get in touch!
I really love this thought! I’ve been budgeting for 6 years now and I couldn’t agree more with your premise. It’s really depressing to live on a budget but we’ve learned we can’t follow it to a “T”. We’ve budgeted in spending money and I’d say 90% of the time we don’t even stick to it perfectly. We always spend a little more than is allocated but I’m fine with that. We’re living life, content, and still making progress.
It takes time to come to that realization, but once you do, it makes things do much better!
I don’t keep a budget, but I do keep track of all my expenses. I like to know where my money is going. If I see my spending is too high in a category for one month then I’ll try to reduce it the next month. This works out pretty well for me.
That’s a good way to do it. Plus, you do keep yourself pretty accountable by posting your expenses on your website each month.
I personally dislike strict budgets. I have a list of things that need to be paid every month (bills/savings) and I have some “fun” money. Being too strict with my budget made me really frustrated and annoyed.
Well, at least you learned your lesson at the “frustrated and annoyed” stage, and didn’t let it drag on. It can get ugly if you don’t figure it out early enough!