Don’t Spend to Fill Up Your Budget

Buy.  Spend.  Repeat.

Where Monkey Brain shops

“A budget tells us what we can’t afford, but it doesn’t keep us from buying it.”
–William Feather

When I was in the Army, we went through a ritual every September. It had nothing to do with dancing or howling at the moon. We would go through a buying frenzy, buying every spare part for our tanks we could get our hands on. I finally had the audacity to ask a senior officer in our unit why we were buying stuff we didn’t need.

“Because if we don’t spend it this year, we don’t get the budget for next year,” was his answer. It was a race to the bottom, and we were all playing along. Because of Byzantine Army regulations, instead of being able to purchase parts when we needed them without having to worry about running out of funding, we artificially pumped up our demand so that we protected our ability to artificially pump up demand next year.

It was a crazy mix of a scarcity mindset and the endowment effect all rolled into one.

The scarcity mindset came into play because we acted like if we didn’t get to spend the money, then someone else would. There was absolutely no incentive to work efficiently or spend less money because of the fear that the money wouldn’t be there if we needed it.

The endowment effect came into play because everyone acted like their budget was some divinely bestowed amount that our unit had a right to each and every year. Since we had it last year, by goodness, we deserved it this year, and we deserved even more next year! We were Gollum, and our budget was the Ring.

It’s not just in the military or the government where we face these problems, either.

We do a budget every month. Hey, I’m a financial planner…OF COURSE we do a budget! We have a line item in the budget for food – both what we get at the grocery store and what we purchase in restaurants. We withdraw the cash for that budget item twice a month and keep it in an envelope.

Sometimes, there’s money left over in the envelope. Maybe we caught some sales at the grocery store, or maybe we didn’t go out to eat like we’d thought we would.

So, what’s my immediate, Monkey Brain response when I see left over cash in the envelope? “MUST. GO. TO. RESTAURANT.” Instead of thinking that, perhaps, it would be wise to carry that money over to the next period so that we don’t have to withdraw as much, my immediate, gut reaction is to go spend it.

It’s Monkey Brain trying to trick me with the endowment effect and with the scarcity mindset. If I don’t spend the money now, then I won’t budget it next time, and pretty soon, we’ll be eating rice cakes and cat food.

Monkey Brain can make a kingdom fall for the want of an abundance mindset.

Here are some things you can do to fight that feeling when you manage to come in under budget:


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  • Ask yourself if you really need to spend the money. Usually, it just takes a few seconds of calm, contemplative thinking to overcome the impulse desires and to realize that you’re trying to rationalize a purchase you don’t need to make.
  • Think of other ways to spend the money. Are you saving up for a vacation? Do you want your kid to go to college without marrying Sallie Mae? If you can think of better ways to spend the money, set it aside immediately and put it away so that you aren’t tempted by it any more.
  • Give yourself some small victories. If you say no to yourself every time you face an opportunity, then you’re going to suffer from ego depletion. You’ll get tired of saying no, and when you REALLY need to say no, you might just say yes. So, replenish your ability to say no by saying yes occasionally when it really doesn’t matter. Buy a sandwich at the sandwich shop instead of going to a sit down restaurant. Buy a cute t-shirt instead of the Jimmy Choos. Preserve that ability to say no.
  • Question your recurring payments. Are there subscriptions that you have simply because you have had them forever, and you never know when you might actually get around to reading that 1983 issue of Sports Illustrated? Go through your spending occasionally and see if there are some sacred cows you can slaughter.

What are your mental endowments? Is it cable television that you never watch? Is it the gym membership that you have when the last time you went to the gym was in middle school? Tell us about them and what you’ve done to fight the urges in the comments below!

About Jason Hull, CFP®

Jason Hull, CFP®, is the Chief Technology officer of myFinancialAnswers, an online comprehensive financial planning service.

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