Budgeting isn't as straightforward as it seems

[slapper]

Milton Friedman said that we base our consumption on our expectations of future income, rather than what’s currently in our checking account. If work has gone well for years, we start assuming it’s the norm. Then our consumption rises to that level. Duesenberry’s ratchet effect says that consumption is easy to increase but hard to decrease. Your story kind of breaks that rule, though. You cut your consumption by 20% in only a month! So maybe discipline was never the issue, after all.

You tracked all of your spending for years. Taxis, cat food, you name it. That gives you an accurate picture of where every last cent went. But it can’t tell you which part was optional. Your average spending over the past few months is simply a record of your past habits. Those habits are tied to your income. They grow as your income grows. So any forecast made on an app that doesn’t take this into account will be off as soon as your income changes.

You should create a budget based off of your lean month. Take this new, lower spending number and treat it as your real baseline. Anything you make above it should go towards debt, savings, or another boring but important thing. Only after you’ve covered those should you put money towards frivolous purchases. This keeps you from spending all of your raise.

[Fortify]

Milton Friedman said that we base our consumption on our expectations of future income, rather than what’s currently in our checking account. If work has gone well for years, we start assuming it’s the norm. Then our consumption rises to that level. Duesenberry’s ratchet effect says that consumption is easy to increase but hard to decrease. Your story kind of breaks that rule, though. You cut your consumption by 20% in only a month! So maybe discipline was never the issue, after all.

You tracked all of your spending for years. Taxis, cat food, you name it. That gives you an accurate picture of where every last cent went. But it can’t tell you which part was optional. Your average spending over the past few months is simply a record of your past habits. Those habits are tied to your income. They grow as your income grows. So any forecast made on an app that doesn’t take this into account will be off as soon as your income changes.

You should create a budget based off of your lean month. Take this new, lower spending number and treat it as your real baseline. Anything you make above it should go towards debt, savings, or another boring but important thing. Only after you’ve covered those should you put money towards frivolous purchases. This keeps you from spending all of your raise.

There are actually many apps these days (depending on where you live) where you can enter your income and outgoings in order to monitor spending, some will even plug straight into your bank account to minimize the manual element. The reality is that beyond a basic budget most people don't really want to know or trace where every cent is spent, because it can actually sap a bit of joy out of life. It's definitely worthwhile reviewing your spending every few months however, because it's so easy to go overboard or start to let wasteful habits creep in. Your first paragraph is interesting and true, a bit like gambling we can start to lie to ourselves to justify what would previously have been considered luxuries becoming regular consumption if our income rises, which can make it hard to trim them out later. Necessity will usually break all habits though and force a dire look at spending that we might not otherwise take.

[Mpamaegbu]

It turns out that our income dictates our expenses.

Isn't that obvious? No one builds on nothing, and that's what happens with income and expenses. There's a reason "income" comes first in that expression. You've to earn to be able to spend.

[Gaza13]

Good that you've learnt your lesson. Budgeting is a good financial practice if you are paying attention to things. It goes beyond downloading a budgeting app. If you do not differentiate your wants from your needs, you will keep overspending even after budgeting. The best practice will be to discipline yourself no matter your income, so that even when your income increases you do not automatically increase how much you spend on things.

Discipline still remains the key in this case, since we often go against our budget. It is always easier said than done, and that's exactly why we need to apply discipline, because many people have ones taken this decision before, but due to the fact that they are not disciplined enough, they couldn't stick to their budget.

Budgeting makes things easier for us to always be on the safer side, so it's very essential for us to always maintain the process and do the needful without going against it.

I agree with what you’ve said. Indeed, there is no other way to manage one’s budget than through the discipline you described. Discipline is not merely a foundation; it is a commitment to controlling one’s expenditures. Many of us find it extremely difficult to stick to a budget, and it is often the desire to make excessive purchases that causes a budget deficit. I believe we should avoid such habits and shift toward a healthier approach selecting or purchasing only what truly aligns with our actual needs, while steering clear of anything else. By applying this kind of discipline, we can certainly avoid situations beyond our control, such as falling into debt. Through such discipline, our money remains well-protected, allowing us to allocate it elsewhere for instance, by purchasing gold or making investments. Make the most of your youth by engaging in meaningful pursuits, and avoid wasting your energy on things that serve no purpose.

[ASloveapg]

Milton Friedman said that we base our consumption on our expectations of future income, rather than what’s currently in our checking account. If work has gone well for years, we start assuming it’s the norm. Then our consumption rises to that level. Duesenberry’s ratchet effect says that consumption is easy to increase but hard to decrease. Your story kind of breaks that rule, though. You cut your consumption by 20% in only a month! So maybe discipline was never the issue, after all.

You tracked all of your spending for years. Taxis, cat food, you name it. That gives you an accurate picture of where every last cent went. But it can’t tell you which part was optional. Your average spending over the past few months is simply a record of your past habits. Those habits are tied to your income. They grow as your income grows. So any forecast made on an app that doesn’t take this into account will be off as soon as your income changes.

You should create a budget based off of your lean month. Take this new, lower spending number and treat it as your real baseline. Anything you make above it should go towards debt, savings, or another boring but important thing. Only after you’ve covered those should you put money towards frivolous purchases. This keeps you from spending all of your raise.

There are actually many apps these days (depending on where you live) where you can enter your income and outgoings in order to monitor spending, some will even plug straight into your bank account to minimize the manual element. The reality is that beyond a basic budget most people don't really want to know or trace where every cent is spent, because it can actually sap a bit of joy out of life. It's definitely worthwhile reviewing your spending every few months however, because it's so easy to go overboard or start to let wasteful habits creep in. Your first paragraph is interesting and true, a bit like gambling we can start to lie to ourselves to justify what would previously have been considered luxuries becoming regular consumption if our income rises, which can make it hard to trim them out later. Necessity will usually break all habits though and force a dire look at spending that we might not otherwise take.

When income increases, many people also increase their expenses. Things that were previously considered luxuries become part of their daily lives after their income increases. Even if their income decreases, their previous habits remain. As a result, financial stress is created. It is important to know how much income they are getting per month, how much is being spent on necessary expenses, and how much money is being spent on unnecessary things. Even if you review your expenses every few months, you can understand where unnecessary expenses are being incurred and which habits need to be changed.

There is no rule that you have to increase your living expenses just because your income increases. If you can save a part of that extra money for savings and investments when your income increases, it will be easier to create financial security in the future. If you increase your expenses every time your income increases, it can be difficult to move forward financially even if you earn more.
You should not wait for a financial crisis to control your expenses. When faced with danger, people are forced to cut back on a lot of expenses. But then there is less freedom to make decisions. If you can review your expenses and reduce unnecessary expenses under normal circumstances, you can avoid a lot of future stress.

[Wahidcroposs]

I think every people should have a plan on budgeting. It also based on earning . It also difficult to maintain but it help to your expense of a month . I think in budget for daily expense, medical, emergency issue should be included and create some saving  for future. Budgeting is no easy but it help us to utilize proper expense from circle of income. 

[Charcol]

~This is the case for sure, as I like to put it "we always live to the max of our salary".
I can vouch for this because without budgeting in the past I have always lived up to
my salary and when I got a pay rise I never actually had any extra money because
 . . . I lived up to that too.

Its very difficult because every mibute of the day we are bombarded with messages
and advertising on how we need lots of more stuff which we dont actually need.

The trick as per the OP is to create an plan, the difficult part is to stick to it!

At least we can try. After living for some time "to the max of our salary", we can see that living on 90% of it is not that difficult. Or, in other words, spending more doesn't make us any happier. For happiness, we need three things: somewhere to sleep, something to eat, and a good-paying job we enjoy, which will cover the first two. And if we have something extra, we can start budgeting for a change. Who knows, maybe life will seem brighter then?

I agree with you, I am not in favor of spending the entire salary unnecessarily. Especially those who keep increasing their unnecessary expenses as their income increases, they find that they have nothing at the end of the month. You are right that living on 90% of their income is not difficult, but that is your case. For others, it may be quite difficult. Imagine that you and I have a monthly income of $2000. You may spend $1500 on everything you need per month. But I may spend $1950 on rent, family medical expenses, and loan installments. While saving 10% may be relatively easy for you, it may be difficult for me to achieve the same goal.

[Cookdata]

I agree with you, I am not in favor of spending the entire salary unnecessarily. Especially those who keep increasing their unnecessary expenses as their income increases, they find that they have nothing at the end of the month. You are right that living on 90% of their income is not difficult, but that is your case. For others, it may be quite difficult. Imagine that you and I have a monthly income of $2000. You may spend $1500 on everything you need per month. But I may spend $1950 on rent, family medical expenses, and loan installments. While saving 10% may be relatively easy for you, it may be difficult for me to achieve the same goal.

If you are talking about people that earned well, I will agree with you. However, not everyone earn enough to even budget. There are people that are employed as sill labour but they got way less than that can cover their their monthly transportation cost, they can't even afford to eat and yet they don't quit because they see that as opportunity to put something on the table. Such people can't anything about budget, they don't have anything to budget than how to survive.

You can only budget when you earn enough money, there is nothing you can when your earning budget is below what you can spend with the time your pay check are issued. I want you to also know that life is unpredictable. You can make all the plans you want and another thing can distort your plans and you will be out of your budget.

[Balrajsahnidc]

Managing one's life based on one's income and budget requires a systematic approach. Budgeting is a complex skill that often requires training. The more adept one becomes at managing a budget, the more one can save and live a life free from debt.

Your budget should be determined by your income. If your income is only sufficient to cover basic necessities, focus on meeting those needs—even if it means there is nothing left to save; otherwise, you risk compromising your health. If, however, your income is sufficient, you should place greater emphasis on savings. Aim to save 15% to 20% of your income, which will serve as a safety net during difficult times.

It is important to pay attention to all aspects of life—even if only to a small extent. This includes food, clothing, housing, education, and healthcare, as well as nurturing friendships, which protect against loneliness, provide mental peace, and help keep depression at bay.
Furthermore, a portion of your income should be set aside for the welfare of others. This fosters humanity; even a small, regular contribution can help, and such acts of giving contribute to the enrichment of one's soul.

[BTC FutureKing]

I agree with what you’ve said. Indeed, there is no other way to manage one’s budget than through the discipline you described. Discipline is not merely a foundation; it is a commitment to controlling one’s expenditures. Many of us find it extremely difficult to stick to a budget, and it is often the desire to make excessive purchases that causes a budget deficit. I believe we should avoid such habits and shift toward a healthier approach selecting or purchasing only what truly aligns with our actual needs, while steering clear of anything else. By applying this kind of discipline, we can certainly avoid situations beyond our control, such as falling into debt. Through such discipline, our money remains well-protected, allowing us to allocate it elsewhere for instance, by purchasing gold or making investments. Make the most of your youth by engaging in meaningful pursuits, and avoid wasting your energy on things that serve no purpose.

To achieve success in life it is very important to use money properly.We should control our power and buy only the things we want.Ordinary people spend on unnecessary things to fulfill their full knowledge due to which they have to face financial difficulties and debt.If we avoid wasteful spending and enjoy something for ourselves every month we can improve our future.The money saved can be used for future support education or investment.In addition we should value our youth and learn new skills and achieve our goals only well.Remember that with discipline hard work and prudence we can not only improve our financial condition but also live a better and peaceful life.

[Stalker22]

Managing one's life based on one's income and budget requires a systematic approach. Budgeting is a complex skill that often requires training. The more adept one becomes at managing a budget, the more one can save and live a life free from debt.
~

Not always that simple, though. You can budget until your eyes bleed, but if your income is just too low, no amount of financial wizardry is going to make the math work.  I used to stress myself sick trying to follow those rigid percentage rules and complex spreadsheets.  It just leads to burnout.  Sometimes life is expensive and unpredictable, and debt happens even when you are doing everything "right."

Even if you did every single thing perfectly right, you are still bound to find yourself at the end of the month putting groceries on credit.  Its simply the way things are.

[Berry2d]

Managing one's life based on one's income and budget requires a systematic approach. Budgeting is a complex skill that often requires training. The more adept one becomes at managing a budget, the more one can save and live a life free from debt.
~

Not always that simple, though. You can budget until your eyes bleed, but if your income is just too low, no amount of financial wizardry is going to make the math work.  I used to stress myself sick trying to follow those rigid percentage rules and complex spreadsheets.  It just leads to burnout.  Sometimes life is expensive and unpredictable, and debt happens even when you are doing everything "right."

Even if you did every single thing perfectly right, you are still bound to find yourself at the end of the month putting groceries on credit.  Its simply the way things are.

Yes poor income stands as one of the reasons budgeting never ends as proposed from onset, many know how to work with a good scale of preference but because the capital is very low it looks as if all his planning efforts never works.
The only way budgeting can create a room for effective spending now is when it is high and enough to pay bills if not all budgets may end in zero.
Although to an extent i will say spending do depends on once marital status but not in full. A single man if not involved in luxurious lifestyle may spend less compared to a married man with children.