4 Budgeting ‘Fixes’ Beginners Try – and Why They Usually Backfire
Everyone – even millionaires who can afford steeper costs of living than most Americans – needs to budget, as it's key to building and maintaining wealth. If you’re just embarking on budgeting, good for you; this is an excellent move! But you need to be discerning. You could easily make an innocent mistake while aiming to kick-start or improve your budget.
Here's what some financial experts had to say about four budgeting “fixes” beginners try that often backfire – and what to do instead.
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Using Percentage-Based Budgeting
Many financial influencers swear by percentage-based budgeting, which entails allocating a set amount of money to cover key categories like essentials, savings and lifestyle. But it can backfire for beginners when it doesn’t make space for short-term, unplanned expenses, like traveling to a wedding or covering a surprise veterinary bill.
“People end up in debt from one bachelorette weekend or vet visit because it didn't perfectly fit into their percentage model,” said AJ Schneider, founder and financial coach at Beyond The Green Coaching LLC. “It's also very arbitrary. Let's say you take out 30% for living expenses, but your rent, utilities, insurance and car payments actually total 45%.”
To avoid this mistake, shift your perspective and focus not only on saving money but on creating balance.
“We aren't percentages; our spending is the sum total of our values, our life experience and our needs,” Schneider said.
Cutting All Nonessentials
When looking to fix our budget, we often default to the drastic measure of eliminating all nonessential expenses. But is this sustainable? Can you actually live a fulfilling life by doing this? Usually not.
“Cutting out everything sounds appealing at first because it sounds decisive and feels like you're taking a ‘big’ action,” said George Mazzella, vice president of marketing at GreenFi. “You get an immediate sense of control by slashing spending.”
Slashing nonessential expenses sounds empowering, but when you go too far, this method will fail in time.
“People burn out quickly, feel deprived and then rebound-spend,” Mazzella said. “You didn't really fix anything here, you just delayed the problem.”
A more sustainable move is to cut low-value, repeat spending that you won’t miss, like, say, subscription services or ordering takeout.
“Keep a few things that make your life feel normal,” Mazzella said. “Consistency beats intensity.”
Doing the ‘Savings Shimmy’
“Coined by me, the ‘savings shimmy’ is when someone takes a large sum of money from their income and puts it into a savings account, and then, within a 30-day period, needs that money and moves it back into checking,” Schneider said.
Doing this back-and-forth between savings and checking accounts is an erratic dance that can defeat the purpose of a budget and make what should be a clean financial plan messy. It’s one of the pitfalls of automating your savings without really understanding the reality of what you can save, and it can enable overspending.
“Getting to move your cash into savings buckets feels empowering and responsible,” Schneider said. “Automating it makes it feel fake and, therefore, has no value when the urge to spend beyond your means feels more powerful than long-term decision-making.”
Ask yourself what you realistically can save versus what you feel like you’re supposed to save.
Having a ‘Fix It Fast’ Mindset
Many of us are wired to think that if a solution doesn’t solve a problem quickly, it’s an inefficient fix.
“We are used to quick wins and instant results, so it is easy to expect the same with money,” said Bree Shellito, director of financial well-being at Ent Credit Union. “But financial health works more like physical health. Fast changes rarely last.”
Instead, take a breath and work on cultivating patience.
“Focus on steady progress,” Shellito said. “The slower and more realistic you go at the beginning, the more success you will see long term.”
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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