Lucas Brenner » Articles » Why Budget Plans Have Disadvantages

Keeping a budget plan at its core is a good thing. They simplify financial planning and make sure you keep track of your income and expenses. I would recommend everyone to keep such a spreadsheet for at least a few months to get a feel for their financial habits.

However, there are also some disadvantages with budget plans that you need to be aware of. You should not get sucked into these negative spirals, because not only your own satisfaction suffers from it, but also your financial habits.

Stress and Greed

It can be stressful to see all of your expenses and the money you have left for the month. Especially when money is running out, this can cause you to become excessively greedy.

It is important to keep in mind that some expenses (for example, for food) absolutely must be made. You also have to remember that you save some money each month and can use this amount as a buffer if necessary.

It is perfectly normal to spend more in some months than in others. It's also okay to exceed your budget sometimes. The point of keeping a budget plan is not to never “go into the red” under any circumstances, but to have a rough guide for future decisions.

Money, if you have saved enough, is there to be spent and should be used accordingly. Only when spending becomes problematic or you overspend in certain areas do you need to act.

Associated with stress and greediness are excessive worries that you may suddenly have about your finances. Worrying sometimes is perfectly normal, but it can get out of hand due to the budget plan. If you worry too much that you are spending too much money, even spending money legitimately is no longer fun.

It's important to find a good balance between heedlessness and too much self-control.

Excessive Attention to Detail

A budget plan is not meant to be a business report. It's not so important to write down every dollar spent. I limit myself to writing down card payments, rounding up to the nearest full dollar. I only write down the money I spend in cash when I withdraw it from an ATM. I do not write down money flows that are only cash, as they only amount to a few dollars.

For tax purposes or areas where one hundred percent accuracy is important, it is better to rely on bank statements than on a budget plan anyway.

The only purpose of a budget plan is to give a (rough) overview of your expenses and to show if there is potential for improvement or need for action at any point.

Budget plans fulfill this purpose and are therefore recommended. However, you must be careful not to overthink things and become greedy when seeing your expenses and the budget still available. In addition, the budget plan must not become a business report that meticulously writes down cent expenditures and that eats up time unnecessarily.

If you take these warnings to heart, keeping a budget plan is a financially sound decision.