"Financial Planning ... it's not always about money."

3 Financial Psychology Questions You Should Be Asking As You Refine Your Budget

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David M. Brenner, ChFC®, CLU®

D. M. Brenner, Inc.
Phone : (858) 345-1001
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Be honest, the number of times you’ve started a budget and didn’t follow through makes you cringe. You are not alone. Did you know that there are multiple budgeting styles and systems that might better suit you and your circumstances than downloading a pre-made template online? For example, if you are a visual learner, it might help for you to actually write down your budget with pen and paper rather than crunch numbers in a spreadsheet on your computer screen. Maybe the intentionality of data entry in a spreadsheet better serves you than the convenience of a budgeting app synched between your various bank cards and transaction history. Finding a style that works for you is essential to long-term commitment and success to your plan.


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Once you figure out which style works best for you then you have to choose an appropriate budgeting system for your goals. There are multiple budgeting systems in rotation however some of the most popular ones include:

  • Paying Yourself First;
  • Zero-Based Budgeting;
  • 50/30/20 Rule.

Paying Yourself First involves saving a predetermined portion of your income before allocating it for other expenses. To some, this may look like a pre-tax contribution to an employer-sponsored plan like the 401K. To others, it may involve manual or automatic transfers out of their account the moment their direct deposit hits.

Zero-Based Budgeting involves an understanding of your expected income in advance and the careful allocation of that income into various buckets that account for every dollar you have. This budgeting system can be really popular for debt elimination or to prevent overspending.

50/30/20 Rule breaks down your income into 3 categories; needs, wants, and savings. The percentages can be adjusted for income and financial obligations. For example, if your needs account for greater than 50% of your income you may need to adjust it to 60% or 70% which gives you less to use on wants or savings. It’s important to be honest with yourself about where you are and choose a style and system that best benefits you and your needs.

Sometimes it’s not the budgeting system or style that’s the problem but your mindset in approaching them. That is why financial wellness involves more than just math. Here are 3 questions you can ask yourself about your financial psychology as you refine your budget.

How Does Money Make You Feel?

Uncovering your beliefs about money is a necessary but often neglected part of financial education. If your associations with money are all negative then any task you set out to complete from paying bills and budgeting to filing taxes, is going to feel like a challenge. By asking yourself how money makes you feel you can begin to explore when and why negative associations or limiting beliefs surface. From there you can make intentional decisions about reframing those thoughts and feelings into more positive and constructive ones. You might view budgeting as a boring chore because it represents what you can’t have or can’t do. An effective reframe of that association might be to convince yourself that budgeting provides you with the freedom to do the things you enjoy while planning for your financial future.

Are Your Goals In Alignment With Your Values?

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Many times the goals people set out for themselves financially have been dictated by financial gurus they’ve listened to online or exist in the pages of a book. Understanding what is important to you by way of your values and creating goals that are in alignment with those values reduce the resistance experienced by working towards a goal that exists outside of your values set. If your goal is to save 50% of your income but your values align more closely with being able to take a portion of your income and give to charity or religious services or being able to contribute financially to your household or extended family then you’ll most likely come to clash with sticking to that specific goal because your values are prioritized. Being able to account for the things that mean something to you in the crafting of your goals brings your values into alignment, increasing the likelihood of you sticking to and accomplishing your goals over time.

Do You Have A Scarcity Mindset Or An Abundance Mindset?

A scarcity mindset is characterized by the perception of lack. This means you believe that there aren’t enough resources or opportunities available and that if someone has it, you cannot. Inversely it can show up in instances where you have something and want to create as much distance between you and the next person being able to have or accomplish that thing as well. Artificial scarcity is often introduced as a sales marketing tactic to encourage people to buy now while supplies last or purchase an item that’s discounted for a limited time only. Artificial scarcity not only prompts people to spend but has historically resulted in injuries and even death as people push, pull, shove, and stampede to be among the first to acquire an item or experience.

An abundance mindset is characterized by the belief that there is enough for everyone and that if someone has it, anyone can. You most likely have an abundance mindset if seeing other people’s success inspires you rather than intimidates you. Seeing their success lets you know it’s also possible for you to achieve that success. Understanding whether you have a scarcity or abundance mindset plays a huge role in your budgeting success as you combat F.O.M.O. (fear of missing out) when opportunities arise that don’t align.

What Financial Traumas Do You Have?

Previous financial trauma is a huge driver in the decisions you make with money and can influence you from as early as 7 years old. Observed interactions between your parents related to money, not being able to pursue a passion or talent because of money, and even the types of food you were able to eat and not eat can all be unconscious triggers for you. By asking yourself what financial traumas you have you can begin to reflect on the triggers of that trauma and their connection to your present-day decisions and behaviors. Budgeting can open a doorway into feelings of shame or guilt related to your spending habits or trigger thoughts of scarcity around not having enough to make ends meet. If you can reconcile these feelings supported by positive reframes or assistance from a financial counselor, financial therapist, or financial coach, you can decrease your resistance to budgeting and other financial behaviors like investing.

By Rahkim Sabree, Contributor

© 2024 Forbes Media LLC. All Rights Reserved

This Forbes article was legally licensed through AdvisorStream.

David M. Brenner profile photo

David M. Brenner, ChFC®, CLU®

D. M. Brenner, Inc.
Phone : (858) 345-1001
Schedule a Meeting