Personal Growth

If Budgeting Your Money Is Too Hard, Try This Instead

Everybody knows having a budget is a good idea. But actually sitting down, looking through your finances, and writing down how much you'll spend on everything this month? That's easier said than done. Sure, many people make and stick to a budget. But for the rest of us, Duke University researchers have figured out one easy way to cut down on your spending without ever using a calculator.

It's Rainin' Cents

The Common Cents Lab is a department in Duke University's brilliantly named Center for Advanced Hindsight, where experts dig into human behavior and psychology to figure out the best ways to help people save money, get out of debt, and boost their earnings. In their 2017 annual report, they announced a few fascinating findings from their research. One of those findings? There are a lot of things people regret spending money on.

For one study, the lab partnered with the mobile-banking app Qapital. They presented millennial-age users with their 40 most recent purchases and asked them to rate how happy they were with the decision to spend that money. The study analyzed 30,000 transactions overall. First, the good stuff: The users rated expenses related to community, healthcare, rent and utilities, arts and entertainment, and education the highest. "Overwhelmingly, these all have to do with self-preservation or enriching oneself," the report noted.

But what about those regrettable purchases? The users' lowest ratings went to digital subscriptions, convenience-store buys, and purchases made at bars, coffee shops, restaurants, and fast-food joints. The very lowest ratings went to bank fees, for obvious reasons. Beyond the digital subscriptions (are you really watching that much Hulu?), these lamentable expenses all have one thing in common: food. It should surprise no one that food and drink purchases bring us the least pleasure of all of our monthly expenses.

The researchers realized this, too, and figured out a way to fight it.

Once, Twice, Three Times Chipotle

Like we said before, personal budgets are infamously painful. But get this — the research is mixed on how effective they are at actually saving you money. "... from a research perspective, the jury is still out on the benefits of budgeting," the report says, vindicating budgetless slackers everywhere. "It is unclear how successful budgeting is at actually reducing expenses even in the short term, given the behavioral challenges associated with creating and adhering to a budget."

The researchers wanted to find a better way. They surveyed more than 1,350 people and asked them to rate each of the following options on how confident they were that they could follow it and how much they thought they would save by using it.

  1. Only spend a maximum of $[20] each time you eat out.
  2. Only spend $[40] per week eating out.
  3. Never eat out.
  4. Only eat out [two] times per week.
  5. Only eat out on the weekends.

While options 1 and 2 are the most traditional — they're the rules you might use if you follow a budget — it was options 4 and 5, the "rules of thumb," that got the best response. People were the most confident that they could follow those rules and believed the rules would save them the most money.

The lesson is clear: If you want to save money, try limiting "spendy" activities instead of limiting the amount you spend. Digital subscriptions eating at your bank account? Limit yourself to the two you use the most. Online shopping bleeding you dry? Keep a list of things you actually need, then limit yourself to only buying the items on that list. And of course, if you regret how much you eat out and order delivery, take a cue from the Duke researchers: Decide how many times you're allowed to dine out every week, and stick to it. Your bank account will thank you.

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For another unorthodox way to manage your money, check out "The No-Spend Challenge Guide: How to Stop Spending Money Impulsively, Pay off Debt Fast, & Make Your Finances Fit Your Dreams" by Jen Smith. We handpick reading recommendations we think you may like. If you choose to make a purchase, Curiosity will get a share of the sale.

Written by Ashley Hamer April 6, 2018

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