Personal Finance

4 common budgeting strategies (that never work)

The best way to learn about budgeting is to eat food court Yong Tau Foo three weeks in a row. Because when you’re broke, that’s going to be your staple diet (Pro tip: if you put in three eggs, you’ll feel super full).

After three weeks of that, you’ll be so badly traumatised you’ll never consider another credit card application. But because this article focuses on humane methods, we’ll instead point out better alternatives – as well as the mainstream methods that don’t work:

1. Plan the budget on a spreadsheet, and then follow it

This is what everyone tries at first because it seems to make sense. You work out how much you have available to spend each week, and then write it all down on a spreadsheet. Then you follow it religiously. It’s as simplistic as a Point of Entry villain’s plot.

Why it never works:

There are two reasons why this method never works.

The first is called ego depletion, which is also an important consideration in investing, and behavioural economics. To put it simply, ego depletion means everyone has a limited store of willpower. If you spend your willpower on one thing, you run out of willpower to discipline yourself in another (e.g. if you use your willpower to resist sleeping in tomorrow morning, you could lack the willpower to maintain your diet later).

Following a budget on a spreadsheet requires too much willpower to function practically. We already need to exercise discipline in almost every facet of life, so there isn’t enough to follow a budget to a tee – at least not over a prolonged period like a year. The spreadsheet method works for an organisation’s budget, but not for an individual human being.

The second reason is that the method lacks flexibility. There are always going to be unplanned expenses, like when you back your car into someone’s motorcycle in the parking lot; or have to pay a fine because your cousin drove your car through a red light. It’s common for one of the situations to “break the budget”, after which you’ll probably give up and forget about maintaining it.

What to do instead:

Budget for one or two specific things. For example, focus on cutting down your Uber bills and your Saturday night pub bills by 20 percent each. This is effective use of willpower, as opposed to trying to control every single purchase.

2. Put your savings in a separate bank account

This method half works. It’s when you have a portion of your money GIRO’ed to a separate account, and it’s probably the first ever budgeting method you’re taught. Usually, the method involves putting 20 percent of your pay into a separate account the moment you’ve received it.

Why it never works:

It’s missing another critical component: lack of accessibility. There’s a reason why your Central Provident Fund (CPF) contributions are so effective – it’s not just that CPF is automatically deducted from your pay, It’s also that you have no way to access it (barring the usual permissions).

If you keep the money in a separate account but carry the debit card for that account on you, you’ll probably still spend it. And there’s even a possible negative effect of having accessible savings:

Because you know you have those savings on hand, you may actually be more susceptible to impulse buys. If you’re down to your last dollar, you’ll think twice before buying those awesome $600 sunglasses. But if you have $10,000 in a separate bank account, you might decide “what the heck” and go for it.

What to do instead:

Don’t just put it in a separate bank account, make it inaccessible. There are many ways to do this, from the extreme (destroy the debit card, so you can’t ever access the second account without having to get a replacement), to the mild (put the debit card at the bottom of the sock drawer).

3. Assign an unfortunate family member to control the budget

This is when you give up on your own self-control, and decide “my wife/husband/father” is better with money, so let them take over. The one in charge then gets to fully control the budget, and dispense money according to their (supposedly) better judgement.

This doubles as a world class method to attract horrible domestic issues.

Why it never works:

First, you’re assuming the trusted family member is some kind of higher being, with greater self-discipline. That may not prove true. Some people can act as checks and balances, but some others are encouragers – they will “okay” your spending, and make it worse (now you have external approval to spend as well).

Second, it puts a lot of pressure on the person in charge. No one likes to keep being the one who says “no”, especially to other family members. After disputes galore, the one in charge will typically give up.

What to do instead:

Similar to point 1. If you must assign responsibility to someone else, assign responsibility over one or two specific things. For example, have your spouse in charge of controlling the MasterCard expenses, while you control the Visa expenses. Or you control grocery related costs, while your spouse controls the vacation budget.

4. Save on many small amounts, instead of a few big costs

This is when you attempt to budget by cutting many tiny costs, like 50 cents off your Mee Pok (walk two blocks to get the cheaper one!) and buying plain cereal instead of Fruit Loops.

It wasn’t easy in Primary school, and it won’t be easier now.

Why it never works:

The ego depletion we mentioned in point 1 is at play. Because you are expending valuable willpower to restrain yourself in hundreds of small decisions, you are quickly worn down.

Furthermore, you will lose motivation because the rewards are not commensurate. You will find that you are skipping cabs on rainy days, eating food you really don’t like, staying cooped up at home all weekend, and saving maybe $40 a month for all that suffering.

What to do instead:

Always start by identifying major costs, and finding ways to cut down on those first. Examples would be refinancing your personal loans, finding a more cost-effective insurance plan with lower premiums, or selling off the car.

Eliminate the big costs that really matter. We know it’s easier to save on little things, like buying kai lan from the local grocer instead of the supermarket; but those little efforts wear you out and won’t change your life.

Ryan Ong

Ryan is a successful property investor and has been writing about money, saving and spending, and personal finance for the last ten years. His articles have been featured in leading publications including Yahoo! Finance, Esquire, Her World and AsiaOne.


  1. huh … when I was jobless for 2 years I subsisted on peanut butter sandwiches for lunch & dinner, 7 days a week, 52 weeks a year. The cheapest $1 loaf of bread (at that time) and the cheapest China-brand peanut butter. I only ate for lunch & dinner. For breakfast and 3X throughout the day, I drank the cheapest 3-in-1 or 2-in-1 kopi. Each packet costs on average about $0.09 (again at that time). For 2 years. And I didn’t fall sick for a single day. My BP stayed around 120/70 throughout and my BMI maintained at 20. When I finally got a job and went for health checkup, my blood test showed excellent total cholesterol, HDL and LDL levels, as well as blood glucose level. Now with a steady job & salary, I come down with bad flu about twice a year…

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