8 Reasons Your Money Management System Might Not Be Working for You

What works for one will not work for all

A lot of financial advice (and certainly most non-professional financial advice) falls into a category that can be best summed up as “this worked for me, so you should do it.” This isn’t unique to financial advice. As former math teachers, we could tell you a million stories about the specific ways in which every parent, English teacher, doctor, or supermarket clerk wanted to inform us about the best way to teach math. And we could also tell you that it’s all pretty much based on the notion that what worked for that individual person will work for everyone.

But when you spend hours and years teaching the same ideas to thousands of young people, what becomes readily apparent is that what works for one is not always what works for another.

In fact, what might be an impeccable, flawlessly designed lesson on any given topic will almost certainly leave a few kids completely in the dark. That’s not a failure of the lesson or the teacher, unless the teacher fails to realize that there’s actually no one activity or one way of teaching an idea that’s going to resonate with every single student. But very often when financial advice is delivered casually, it is claiming to do just that: give a single piece of advice that is going to work for everyone. But it won’t, so it’s a pretty hit or miss strategy to take advice from your uncle, father-in-law, or that person who has a show on MSNBC or a channel on YouTube.

And what it also means is essentially, even as financial advisors, we can’t actually, with 100% certainty, prescribe or teach a money management method that will work for all of our clients. We can give them things to try, things that can be tested and modified, but ultimately, what works for some will not work for everyone.

That being said, what we can do is talk about the elements that all effective money management systems have. Because without each of these in place, what can seem like a good management system, can end up leaving us feeling like a failure if/when it doesn’t work (maybe tomorrow, maybe a year from now, maybe 30 years from now), when in reality, it may have been that we missed some key elements of planning in our system, even if we implemented it with fidelity.

So, as you continue to work to find the money management system that works best for you, keep in mind that any system that’s going to work for both short and long-term money management needs to have the following characteristics:

It pays attention to what we can control, and it’s fundamentally simple.

There’s no magic in money or budgeting, it comes down to the same thing.

Two controllable components: What you earn, and what you spend. And a budget that’s not working has only two levers to make it work better – spend less or earn more.

It considers a bigger picture than just monthly expenses.

A simple list of your monthly bills is going to underestimate your cost of living.

It doesn’t account for expenses that occur irregularly, like once a quarter or once a year, or even once every three to five years. And though lists of expenses often account for things like gas and groceries, they often underestimate discretionary spending. 

A money management plan that is going to be effective must account for all of your expenses, even those that don’t occur every single month.

It expects the unexpected
(and saves for it).

Life is full of unexpected expenses.

Even if you have done a great job budgeting for your irregular, non-monthly expenses, a budget that doesn’t have a category to save for unforeseen larger expenses (like unexpected vet or medical bills, or major home and car repairs) is going to come up short, it’s just a matter of time.

Murphy’s law is as applicable to your financial situation as it is to anything else – if it can go wrong, it will go wrong. If you’re pretending it won’t, you’re working with a money management plan that will ultimately come up short when it does.

It leaves room for flexibility.

This sounds like “expects the unexpected,” but it’s a little different. “Expect the unexpected” means regular and intentional savings for big expenses you do not see coming.

Leaving room for flexibility means not committing your spending down to the last dollar of your income. It acknowledges that some months you might have to put an extra tank of gas in your car, or perhaps just a fun thing comes up to do with friends that you weren’t expecting that costs some money.

If your income is committed down to the last dollar in terms of expenses, even a small unexpected expense breaks the budget.

Notice the difference here – it is fine to have a plan for all of your dollars – but you need to make sure you’re not committing each one to a specific expense. Some of your dollars need to be committed to flexibility.

Budgets need breathing room. How much breathing room probably depends a lot on how much of a planner and categorizer and tracker you want to be, but every money management system needs a way to roll with smaller expenses that you don’t expect, without having to tap into its savings or emergency system.

It is highly interactive and has regular opportunities for feedback.

If you are a person who gets to the end of a month only to realize you’ve once again not met the savings goals you have for yourself, or, worse yet, added more debt to your credit card – you need more regular check-in points.

A common thing to do in budgeting is to plan it, set it aside, and look at it again at the end of the month (or maybe many months later) only to realize it didn’t go according to plan. Money needs to be interacted with regularly. It’s impossible to believe we will be successful in money management and accomplishing our financial goals if we only take stock of them once a month or a few times each year.

This would be like expecting to transform our fitness by taking Zumba class once a month, or to improve our dental hygiene by flossing only once a year.

If you have a monthly budget but you only check it at the end of the month, how could you possibly correct for any overspending or missteps during the month?

And for those of you who may be clamoring that you are quite successful with money and staying in budget, even though you don’t budget or track regularly, I would posit that you have a lot of small, intuitive, subconscious, and/or casual interactions with your money regularly, and that you are not actually avoiding or ignoring it for months at a time. You may not need this level of intentionality in creating more regular check-in points, because you’re doing it on autopilot, but this blog post probably wasn’t written for you anyways.

The other reason this is important is because sometimes a system that worked for you at one point, may no longer be working for you, and it’s important to see that and make changes to it sooner rather than later.

The use of debt is minimal,
strategic, and intentional.

Debt – while not an enemy of a good money management plan, should only be included in ways that involve a full analysis of the costs and benefits of taking it on (say, for education, or a home purchase), because debt payments can severely limit your agency and flexibility to make and adjust your money management plan.

A person who carries very little debt can often, in a pinch, substantially reduce living expenses for a month or two if that is needed; a person who carries a lot of debt has no such option.

About 50% of Americans are currently carrying credit card debt (that doesn’t get paid off, in full, each month), and there is nothing that wrecks a money management plan faster than letting this be an okay way to deal with cost overruns.

It is not.

It is crippling, and it’s typically related to some type of avoidant thinking about money that allows us to believe that even though there’s not enough of it now, surely there will be so much more of it in the near future that we will be able to not only cover our future expenses, but also help pay for the ones we took on in the past.

Credit cards are also quite psychologically elusive. It’s easy to feel like the charges you put on them are not real, and not immediately taking away from your quality of life or other wants or needs that you have. But they are real, and in fact they are taking MORE away from those other things, since the 20-35% interest rates most of them carry mean you’ll be paying a lot more for that $500 charge than $500 of the real dollars in your bank account. 

There is not a good money management system out there that uses credit cards in any way that doesn’t include paying them off, in full, every single month.

It hasn’t forgotten about
a future version of you.

In the hierarchy of needs, we all have a present bias (and should). After all, if we can’t survive in the present, it seems unlikely that we’ll need to plan for the future.

The problem is that we also tend to have present-bias for our current wants over our future needs. Once your current needs are met, the next critical step in a money management plan is to start putting money aside for those future needs.

Even an extremely effective current money management system will likely leave you feeling let down if it fails to consider how it needs to provide for a future version of yourself.

This is why underearning – even if you don’t have any credit card debt – can be so insidious for your financial health. If you’re able to live comfortably on your current salary but aren’t able to save for the future-you, then that is also setting you up for future failure. In fact, spending mindfully and within your means while also not being able to save is a sign that you might be underearning what you need to make to live comfortably.

The real magic is in your ability
to follow it.

Don’t get me wrong, having the plan is important.

And a plan that ignores any of the above items is likely going to leave you feeling unsuccessful and in a financially vulnerable position, even if you implement it with extreme fidelity. But the implementation, that’s where the actual magic happens (and where things tend to really fall apart) for a lot of people.

The magic of a plan that fits you – that works for you, is that it takes away a lot of the unnecessary barriers to your successful implementation.

  • Hate tracking?
    If you hate tracking and can’t seem to do it, you need a money management plan that can keep you in budget without asking you to track or categorize your spending in an excessively detailed way.

  • Always have $0 in your checking account?
    If you tend to spend down to the last penny available in your account, you need a plan that automatically takes those funds out of your account and puts them towards your savings goals (likely in a completely separate savings account you won’t see next to your checking account) so that you never see that money as “available” to spend.

  • Credit card debt keeps sticking?
    If you just can’t stop building up credit card debt that you can’t pay off at the end of the month, you need a plan that doesn’t involve a credit card. At all – get rid of it.

  • Avoiding looking at your money?
    If you simply have a hard time looking at your budget and your money regularly, and a daily or weekly calendar reminder isn’t getting you any closer to the regular interactions you need to have with your money, you may need an accountability partner or a coach.

  • Can’t find a plan that works for you?
    If you’ve really struggled to find a plan that works for you, think about something unrelated to money that used to be extremely difficult to navigate, but that you have since set up the systems and processes in your life to make more functional. What systems or processes did you put in place to make that change? How can those be translated to your money management? 

The beauty of a good plan is that it works for your brain and your way of living.

But no plan is going to go through the hard work of saying “no” to something you want to spend money on because it’s simply not in the budget, that’s on you.

GPS can only get you so far – the rest is on you, the driver

Yep – we’re repeating point 8, and giving it its own section – that’s how important it is.

The plan (aka your GPS) itself can’t go through the process of pursuing more or higher paying work because you’re simply not making enough to pay for what you need or want.

If you’re trying to spend less, but you haven’t found yourself in a situation where you, in the moment, make a conscious decision to turn down something that sounds good to eat or fun to do, the plan may not be the problem.

You need to put your attention and effort on implementation, on staying present in every spending decision and making them in alignment with your plan. A plan that is a good fit for you will remove unnecessary barriers to its success, but a plan that is a good fit for you won’t remove tradeoffs and hard decisions. You’ll still have to make those.

That might mean being honest with yourself about what contexts really push you to make spending decisions that actually aren’t in alignment with your budget or values, and avoiding those contexts where you tend to overspend – at least until you clearly develop the habitual ability to say “no” to items you never really intended to spend your hard-earned money on.

Here’s an example of how this has worked for each of us:

Being mindful of the fact that we’re not trying to say “what works for us will work for you,” we also think sometimes, examples of what this implementation and “setting yourself up for success” piece looks like in practice can be helpful. (And it’s good to have evidence that even your financial planners have to work hard to keep good money management plans and habits in place, and that each of us approach this a little differently.)

So here are a couple of examples of how we have created contexts that set us up for success.

First, become aware of these contexts.

I have realized that it’s never worth it for me to take a casual trip to Target or the mall because I always leave with something I didn’t intend to buy.

Second, put a system in place to stay away from the context that’s pushing you to spend when you don’t logically want to.

I learned to only go to Target or the mall if I have a specific need and to try to squeeze those trips in between other meetings/events. Why? Because I can’t spend an hour casually browsing (& finding fun things to spend money on) if I have to get to work in 20 minutes. I have to run in, grab my vitamins, and leave!

Third, keep getting back up.

The important trap to avoid here is to think “well I already messed up, what’s the point in continuing?” whenever I do end up going to Target for some mindless spending. I try a more compassionate, forgiving approach with myself and it usually works to think “I probably shouldn’t have gone to Target today and I plan to avoid it for the near future until I’m feeling more in control of my spending.” Basically “I messed up and I’m going to do better by avoiding it” (owning my mistake and committing to action to improve).

I definitely recognize that we’re not all going to be perfect robots sticking to our budgets and systems (remember the flexibility piece above??) – so I recommend working with your humanity to practice both radical honesty and accountability with yourself about messing up, but then taking action to do better. And again! I’m not saying this will work for you – it’s just an example to help give you more concrete detail on how you might translate it to fit you.

First, become aware of these contexts.

I place an extraordinary amount of value on spending quality time with my friends. What that means for me is that in times when I am earning enough to meet all my current and future needs, I budget a good portion of my discretionary funds for expenses related to this – I consider it to be very values-aligned, if all of my other needs and goals are being funded. But there have been many times in my life where my budget has simply been too tight to really spend money going out with friends, and I’ve had to be really careful of my tendency to overspend in these contexts. 

Second, put a system in place to stay away from the context that’s pushing you to spend when you don’t logically want to.

I learned that it was unrealistic to think that I’d be able to go out and say, buy a beer, and not have a second beer and maybe get some food also if I was with good friends and having a good time. Suddenly an $8 outing has turned into a night where I spent $40-$50.

So, there have been many stretches of time in my life where I simply didn’t say yes to an outing that involved eating and drinking out with friends. I knew I simply wouldn’t be able to resist the urge to spend more than I had intended.

But I didn’t abandon my friendships entirely – they are, after all, very high value. Instead, there were more walks, bike rides, and backyard bonfire nights. Ways that we could connect and spend time together, without having to spend a lot of money to do so.

Another key piece of this for me was honesty. Though it’s hard to say to friends, “I simply can’t afford this right now.” I found that it has been critical to set that context with them right from the beginning, so that I didn’t have to come up with an excuse not to go out and eat and drink, and so that they knew I was not avoiding them or not wanting to hang out, but rather, I was just prioritizing not overspending.

Third, keep getting back up.

I like that Gabbi used the words “radical honesty and accountability” about messing up, and talked about taking action to do better. I have found that, when my budget is tight and lacks flexibility, a clear and immediate tradeoff is the key to making better decisions in the moment, and quickly getting back on track. I don’t like the feeling that things are spiraling, and I’ve had many times where even a penny over budget was more than I could sustain. I’ve learned that it’s important for me to make a quick correction so that my brain stops worrying about a past poor decision and how it’s going to impact my bottom line at the end of the month. The easiest way to do that is to find an immediate tradeoff for what I just overspent.

So, for example, if I went out intending to spend $8 on a single beer, and ended up ordering dinner and a second beer, and all told spent $40. That’s $32 I didn’t intend to spend. I may have a $30 weekly budget for groceries – and so the next day I might sit down and look at my budget and decide to skip a week of grocery shopping. In my case that doesn’t mean I won’t eat… it just means I’ll be living on peanut butter, and whatever random assortment of food that’s left in my house that won’t excite me, but will sustain me.

And while a diet of expired canned green beans, ramen noodles, and peanut butter may feel like “self-punishment” to some, it doesn’t feel that way to me at all–it feels like choice and agency. In fact, if I do find myself in the exact context I’m trying to avoid again, I can quickly and easily frame up the conversation with myself as “if you have another beer and order some dinner tonight, are you willing to eat oatmeal for every meal this week since you won’t have it in your budget to grocery shop?” and if the answer is yes, that’s great. I have full, guilt-free permission to spend and not feel bad about it. And that’s a form of self-care, because I have agency and flexibility in making that decision, and don’t have to feel bad about it if I do.

Have a question or want to reach out to Lorri or Gabbi?

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