Is Budgeting Overrated?
Take it from a financial planner, not everyone needs a budget. In fact, sometimes a budget can distract you from the real solutions to your financial problems.


When I was younger, I tracked and budgeted my spending daily, and even though constant attentiveness paid off for me, it didn’t pay off in the way you might expect. On that note, I don’t think everyone needs a budget. In fact, for some, I think having a budget can backfire.
Who Needs a Budget?
First, let me be clear that I do believe some people need a budget. If you’re living paycheck to paycheck, as up-to-two-thirds of Americans are, you should absolutely identify where every dollar is going. And, ideally, use that information to make necessary changes.
Anyone undergoing a major life change should also monitor their budget for at least a few months. For example, as I move from a small town in Georgia to a midtown condo in Chicago, you better believe I’m laser-focused on my spending. Consider utilizing apps like You Need a Budget, one of the most popular budgeting apps, to guide you through any major transitions.

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If you’re having a child, starting a new job, or even getting married … well, you need a budget (the philosophy … and maybe the app, too).
The folks over at You Need a Budget have also written extensively on successful budgeting, which could also be helpful through your transition.
How Can Budgeting Backfire?
My move away from budgeting began in my final years of graduate school. Like most grad students, I was making very little – close to the California minimum wage while living in the San Francisco Bay Area. Tracking every dollar, every month, for years, I could no longer avoid the obvious: The problem wasn’t that I was bad with spending. Rather, the problem was I had so little to spend.
I couldn’t budget myself out of that problem. Focusing on the details of spending, I lost sight of the big picture. I needed to increase my income … by a lot.
As I said before, tracking my daily spending helped me – even though it didn’t help me identify my unnecessary costs as I had hoped, I did learn what my real issue was.
The adage is true: if all you have is a hammer, every problem looks like a nail. So, if all you think about is budgeting, every financial issue is a spending problem.
Can we budget and think about raising our incomes?
Perhaps – but we must recognize our limited attention. We don’t have unlimited time or an unlimited ability to make decisions. Budgeting can be hard work and very time consuming. If you’ve only got enough mental energy for one hour of personal financial work each week, then determine what is the best way for you to spend that time and energy.
Alternatives to Budgeting
If you, like me, are exhausted by budgeting, you need to find alternative solutions. For example:
- Focus on raising your income. Many people settle for lower incomes than they deserve, however the single best thing you can do for your personal finances is to make more money. For people who are employed, the simplest way to raise your income is to ask for a raise. If you’ve got spare time, consider joining the gig economy. And, for real big pay bumps, you may need to get a new job.
- Reduce (or eliminate) fixed expenses. A major limitation of traditional budgeting is the focus on discretionary spending. Decisions around discretionary expenses must be made repeatedly, requiring constant attention and making it difficult to focus on the big picture. Most of our spending is fixed, and according to the U.S. Bureau of Labor Statistics: 70% of our budgets go to housing, transportation, health care and taxes and much of the remaining 30% goes toward minimum, necessary food and clothing expenses. So, if you want to see profound changes to your bottom line, you must cut some of your fixed expenses. As painful and inconvenient as this can be, it’s usually the case that cutting expenses just once will improve your spending. For example, a couple that sells off their second car could pocket $10,000 immediately and then avoid $10,000 each year in expenses. Or, a single person living in a two-bedroom high-rise apartment could move into a one-bedroom apartment in midtown and save $2,000 a month — $24,000 a year!
- Make a spending plan. While some people equate a budget with a spending plan, they are different. Budgets tend to look backward and focus on the minutiae. In contrast, a spending plan looks forward and focuses on big-picture goals. Periodically review your spending and set goals for where you want your money to go. Make sure your needs and savings are covered and paid for first before approximating how much you can spend on everything else. Avoid getting lost in the weeds – you need to be fresh and ready for when you ask your boss about that promotion.
Ultimately, the best approach to spending is the one that works for you. If you feel the need to keep a budget, here’s another idea: Get someone else to track your spending for you. Consider offloading your budgeting onto a financial planner. Then, you get the best of both worlds: the budget and the attention you need to focus on the big picture and live your life.
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Matt J. Goren is an Assistant Professor of Financial Planning at The American College of Financial Services who focuses on the interplay of personal finance and psychology. In addition to teaching and developing content, he provides strategic consulting on financial literacy initiatives and hosts a personal finance radio show, Nothing Funny About Money, which was named 2018’s most outstanding consumer financial information resource by the AFCPE.
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