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Key Takeaways
- Nearly 86% of people report using a budget regularly.
- Less than 25% said they stick to their budget.
- Reasons why people can’t stick to budgets include overspending, increasing expenses, debt, and unrealistic goals.
- Age, income, and race often play into how and whether people budget.
Money is on the mind of many consumers. As many as 54% of Americans spend more than four hours a day thinking about their finances. So, it’s no surprise that consumers consider money management a priority, with more than two-thirds saying they use budgets to get through the month.
However, research shows that few people actually stick to their budget. Learn why budgeting is so critical in today’s economy, what’s preventing you from sticking to your budget, and popular budgeting techniques that get you back on track.
To Budget or Not to Budget?
A budget represents a plan that tracks your income and expenses, monthly or annually, to help you manage your money. The budgeting process can provide key insights into how much you earn and where your money is going by tracking your spending and expenses. Once you know how much money is coming in and how much you spend, you can decide where to allocate funds going forward, such as saving or finding better ways to spend your money.
Budgeting has become a very important tool for many consumers. Roughly 95% of people surveyed by Debt.com said they felt it is critical in today’s environment, with 86% of respondents saying they use a budget regularly. This shouldn’t come as a surprise, since 69% of consumers say they’re living paycheck-to-paycheck.
Some of the most common types of budgets used today include:
- 50/30/20 plan: Half of your income goes to pay for your necessities, while 30% pays for discretionary spending, and 20% goes toward savings and debt.
- Envelope budget: This plan involves using cash in envelopes for different categories.
- Zero-based budget: Every dollar you spend during the month has a purpose with this budget style.
- Pay yourself first: You prioritize savings and debt as well as necessities like housing and bills before anything else.
- No budget: A flexible plan that accounts for your income and must-haves. The remaining income is disposable income.
Budgeting apps are also very common. These are digital tools that are designed to help you track your income and spending.
11.5%
The percentage of people who say they don’t create a budget.
Sticking to the Budget
Creating a budget is just the first step to financial well-being. Having a budget in place can help reduce your stress and give you the power to take charge of your finances so you can make important decisions. It also allows you to pay off your debt and achieve financial security. But sticking to that budget can be a real challenge.
Of those who created a budget, 22% stuck with it, according to Discover. Nearly half of those felt accomplished, and 38% reported feeling they were prepared for an unexpected situation. But, out of those who were proactive and budgeted their money, only 14% didn’t adhere to it.
What’s Really Getting in the Way of Better Budgeting?
Creating a budget can help improve your finances. However, budgeting takes discipline, and you may face personal and economic challenges over the long term that may prevent you from sticking to your budget.
Here are some of the most common reasons why people don’t stick to their budget:
- Spending becomes easier than budgeting or saving
- Rising prices that cause your monthly expenses to increase
- Debt levels are hard to manage and pay down
- Budgeting is too time-consuming and difficult
Not having any goals, setting unrealistic goals, a lack of income, not knowing spending triggers, and an unstructured budget can also derail your budget.
Note
Loud budgeting is a personal finance trend on TikTok where people vocalize their budgets out loud. It involves talking about your financial limits instead of making excuses or overspending just to be part of the crowd. With a loud budget, you take accountability for your finances and make it easier to discuss money matters.
Budgeting Across Generations
Factors like age, income, and race often factor into how confident people are with their money management skills, including whether they use a budget.
| Age Range | % of Adults Who Budget |
|---|---|
| 18 to 29 | 48% |
| 30 to 49 | 55% |
| 50 to 64 | 64% |
| 65+ | 68% |
| Income Level | % of Adults Who Budget |
|---|---|
| Lower income | 46% |
| Middle income | 62% |
| Upper income | 74% |
| Race | % of Adults Who Budget |
|---|---|
| White | 64% |
| Black | 53% |
| Hispanic | 48% |
| Asian | 46% |
According to Pew Research Center data, men are more apt to create a budget than women. The center’s study showed that 61% of men said they budgeted compared to 58% of women. Women said insufficient income prevented them from budgeting, while the majority of men said budgeting was too time-consuming.
The Surprising Truth When It Comes to Budgeting
Although people recognize the importance of money management, demonstrated by the high percentage of people who use budgets, less than one-quarter manage to stick to one.
A major contributing factor to a failed budget remains overspending, with 74% of people reporting they overspend, and 39% exceeding their monthly budget, according to a Clever Real Estate survey.
Even those who do a weekly budget, overspending is a problem for 15% of respondents. Roughly two out of five Americans say they spend over $5,000 above their budget, while 14% exceed their monthly budget by $10,000.
Consumers who adhered to their budget said they felt a sense of accomplishment (46%), secure (38%), and confident (36%). They also said they felt prepared for an unexpected situation (38%) while feeling relieved (37%).
The Bottom Line
Many consumers understand the need for budgeting, which is why so many create their own. Even though they know how important budgets are for money management, very few people end up sticking to them. Those who adhere to their budgets, though, say the real payoff isn’t just financial. It’s the confidence and control that come with staying on top of spending plans.
