Why Your Personal Budget Never Seems to Work

Ryan Ong



Ever had a budget system that worked? Thought not. Successful budgeting is as rare as successful dieting, with twice the stress. You’re not a corporate entity, so the methods of an accounting department won’t work for you. Nor for any human being. There’s too many neurotic tendencies involved; the human brain respects budgets like our MPs respect public opinion. So what can you do about it? Let’s have a look:


Budgeting is Not Natural

Budgeting works with organizations, but seldom with individuals. A company’s marketing department can have a budget, and have a reasonable chance of sticking to it. But you’re not a company.

Not all your desires have a rational basis; and there’s no one in charge of your personal finances. When you swipe that credit card, there’s no boss to slap you on the wrist and say “We’re over-budget, no approval.” We lack self-denial. Don’t feel bad about that, because it’s a human trait.

I e-mailed Consumer Behaviour Analyst Anthony Class, who tells me:

If we could deny ourselves with 100% consistency, we’d have no overweight or underweight people, no chain-smokers, no alcoholics, and probably no credit cards.

But that’s clearly not the case. It’s never as simple as saying ‘I will only spend this much, and deny myself the rest’. That’s no different from an alcoholic saying ‘I’ll just stop at one’.

Maybe you’ll find one or two people out of a few hundred thousand who can do it. But for the rest of us, we know we’re lying to ourselves.”


Writing on a palm
At MoneySmart, the budget’s always on hand.


But does that mean there’s no point to a budget? Not at all. It just means you need to change your ideas about budgeting. You need to:

  • Accept Failures and Recover
  • Turn the Budget into a Game
  • Plan for Fun
  • Plan for Emergencies
  • Include Automated Payments


1. Accept Failures and Recover

Most budgets die on the third month. That’s when you check the numbers and find that, as far as your plan goes, you’re further off-course than a $5 ferry to Bintan.


Guy pushing a trolley
“We’re already $15 over. What’s an extra jar of caviar. And maybe pate. And maybe…”


Debt Counsellor Geraldine Kwan advises you to stick with it anyway:

You must expect a new budget to go wrong. When you first plan the budget, it’s speculative. You will overestimate or underestimate things.

Within a few months, you might decide your budget is impractical or impossible. That’s fine. You must edit the budget to something more realistic, and carry on. Don’t just decide ‘Forget it’. 

Even if the budget is reasonable, you will probably slip-up at times. Just accept it, and try again next month. It’s like sports; a good sportsman repeatedly decides to do his best, even if he failed this time.”


2. Turn the Budget Into a Game


Playstation 3 in a box
See? I ALWAYS turn my budget into a game.


Geraldine prefers to turn budgeting into a competition. According to her, this heightens a person’s ability for self-denial, as a budget game rewards restraint. She says:

It is harder to repress an urge than to indulge in it, because there is no immediate reward in self-denial. There may be in the sense of financial security, but that comes much later.

Geraldine organizes budget competitions, where contestants strive to save the greatest amount of cash every day. She suggests doing this with friends or relatives. The system is:

  • Everyone uses cash (no credit cards) and starts the day with $20.
  • The one who ends up with the most money saved at the end of the day wins 2 points (1 point in a draw).
  • Anyone who spends no money gets 3 points.
  • At the end of the week, the person who’s accumulated the most points wins.

Geraldine adds that “…end-of-day comparisons are actually more important than end-of-week comparisons. At the end of the day, everyone should reflect on how they spent, and how they won or could have won.”


3. Plan for Fun


Skyboarding without a parachute
Don’t be stupid. Who would include a parachute in an entertainment budget?


You are not a machine. You need to have fun. And a common error is to leave no room in the budget for entertainment.

It makes sense to regulate entertainment costs (e.g. maximum $24 for movies this month). But don’t try to cut out entertainment altogether; you’ll either break the budget, or wind up writing your name in poo in a padded cell.

Unlike a lot of counsellors, Geraldine doesn’t advice you to find a cheaper hobby. She says:

It makes more sense to regulate the amount you spend on your hobby than to try and change hobbies. You can’t just decide to stop liking sail boats and start liking crotchet.

Geraldine also says cutting entertainment will affect your persistence. A budget that makes you miserable is a budget that won’t last.


4. Plan for Emergencies


Hospital bed
Don’t have the budget for that kidney. You got an economy range?


If you’re planning a wide scale budget, plan for emergencies. You can’t plan exact expenditures for flu medication or car trouble; but you can have contingencies.

According to Geraldine, this isn’t just about setting aside the money. She says:

While you should set aside money for emergencies, a complete budget should take into account more than that. For example,what happens when the emergency fund is not enough?

You must know the maximum repayments you can handle, if you were to use credit cards or loans. This might compel you to get more appropriate levels of insurance, which are then worked into the budget.”

You should aim to accumulate three to six months of your income as an emergency fund.


5. Include Automated Payments


Person doing bills
…and these bills are for the magazines that tell me how to save on bills.


Most of us automate essential payments, like loans, credit card bills, and utilities. However, don’t exclude these from appearing on your budget. Geraldine says that:

You must have a good idea on your spending habits, even if payment is automated.

You must be able to see that you spent too much on utilities, so you need to cut down on power use. Or you must see how much loans and credit card bills cost you, so you will become more averse to such things.

Seeing the bills also reminds you why you are budgeting. You will also think twice before adding another automated payment to the list.”

Image Credits:
Ludovic Hirlimann, Mr. Thomas, ltiro, RobotSkirts, stevecadmanJosé Goulão, troismarteaux

Does your personal budget work? Comment and let us know your methods!

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Ryan Ong

I was a freelance writer for over a decade, and covered topics from music to super-contagious foot diseases. I took this job because I believe financial news should be accessible and fun to read. Also, because the assignments don't involve shouting teenagers and debilitating plagues.