How to Budget as an Emotional Spender
Keeping track of your finances without pulling teeth
Creating a budget is an unpleasant emotional rollercoaster for many, but for many right now, it’s a necessity. Between the recession, unemployment, and the job market, many people are forced to re-evaluate their finances.
But for many people, it’s not hard because they have to look at numbers on the page: it’s because there’s an emotional aspect to their spending. So to create a budget without it feeling like pulling teeth, you need to do an emotional audit as well as a financial one.
And to start with that, let’s talk about a budget meme.
This meme seems like a dumb conversation, but it shines the light on the truth about money for many people.
It seems super easy to budget for this person: there’s something ‘non-essential’ on the budget, and it should be more than easy enough to reduce spending on it.
Except that’s not how everyone thinks.
Have you ever met someone who spends far too much money on seemingly random things? They spend $200 on new clothing. Or $2000 on new electronics.
Or, perhaps, $3.12 million on a baseball card.
For these people, these purchases are not merely a transactional thing: there may be a deep emotional attachment to the things that they buy.
To give an example, imagine you had a virtual night out with your friends. You all ordered food from the same place had a couple of beers, and maybe each rented the same movie online multiple times.
The logical spender would see the cost as maybe $40 and could easily see a couple of places to cut spending.
But the emotional spender? They see a (virtual) night out with friends. To cut costs on this event might mean to worsen this experience for a couple of bucks.
As a result, money conversations are rarely about the numbers. For many people, it seems wrong that numbers lined up on a page represent dreams, goals, or even safety.
So how do you budget if you have that mindset? The trick is to do an emotional audit.
Evaluating your emotional attachment
Let’s say that you’ve calculated that you have $75 to spend on a specific day (learn how to calculate your daily number here).
Would you be willing to spend $10 on groceries? Most people would answer yes: after all, they would need to eat.
On the other hand, would you be willing to pay $20 for new books? Some people might, while others might not.
This is the process of emotional auditing, a concept brought up in Living Rich by Spending Smart, by Gary Karp.
He recommends going through your expenses and evaluating the emotional aspects of how each expense makes you feel, with a 1–3 rating.
- 1 means that it’s either crucial to you somehow or would be a significant blow to your emotional state
- 2 means that it’s nice to have, but it’s something that can be put on pause
- 3 means that you have no emotional attachment to the expense
You should start by looking at all of your annual, quarterly, or monthly subscriptions and memberships.
If you’re unsure how to keep track of all of these things, it’s very likely that your bank or an application like Mint has taken your credit card transactions and organized them into specific spending categories.
As you go through these charges, don’t decide what to cut at the moment: instead, just mark how these memberships make you feel on an emotional level.
After looking at your recurring expenses, then look at spending categories that have been automatically organized to see what you likely spend in a month for that category.
After that, you can finish off by looking at individual transactions.
Once you’re done with that, then look over what score you gave each re-occurring expense and figure out ways to cut back on things that you don’t care much about.
For example, if you rated your monthly gym membership as a 2, perhaps you can either put it on pause or switch to a pay-per-visit plan.
These can save you money but it doesn’t put as big an emotional strain as cutting it off entirely.
Sorting out your emotions and money
According to Dave Ramsey, financial management involves 20% head knowledge and 80% behavioral change.
This is especially important for emotional spenders: for many, these numbers can bring joy, comfort, or a host of other emotions.
So rather than trying to force your behavior to change drastically and suddenly, bringing negative emotions such as bitterness, or depression into the mix, figure out what expenses affect you the most emotionally.
If you’re able to come in $200 under budget, does it matter, number-wise, what you spend on each category?
All of the advice that is posted online about guidelines is what the average consumer spends on a category if they don’t feel very strongly about something.
So don’t cause yourself more undue stress and anxiety on the rollercoaster that is budgeting. Make sure to take yourself and your needs into account.