Budget Busters 1

jacobted Behavioral Finance, blog, Budgeting Leave a Comment

“What a fool believes, he sees.” Doobie Brothers

Many of us have no idea how to go about creating and living within a budget. Yet many of us have been on a diet. Why does budgeting scare so many of us? Money influences our behaviors in ways we are not aware of. In a series of posts, I will demonstrate how many of the skills required to create a diet are the same as those required to build a budget. Skills that can be learned.

Meet Mitchell. Mitchell just returned from his annual physical. Seems Mitchell put on some additional weight.

Meet Martha. Martha just returned from her annual financial review. Seems Martha put on some additional debt.

Mitchell goes shopping, tries on some pants, and to his surprise he is now a size 42 waist. He thinks to himself, “Maybe I do need to go on a diet.”

Martha goes out to dinner, presents her credit card to the waiter, only to find out that the card has been denied. She thinks to herself, “Maybe I do need to go on a budget.”

Mitchell comes home, looks in the mirror and says, “I don’t look that bad. Doctor can’t tell the difference between fat and muscle.”

Martha comes home, tries on her new Carolina Herrera gown, Gucci purse, and Ferragamo shoes, and says, “I look amazing.  Next weeks gala will make my career. I need this. I deserve this.”

Mitchell and Martha are not stupid. But they are human. And human nature, being what it is, allows smart people to justify bad behaviors.

Stay tuned for part 2.

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