Keep Your Budget Simple & Avoid Decision Fatigue

One of the biggest benefits of budgeting is peace of mind. You get paid, you give every dollar a job, and then you’re basically set. Sure, you might need to roll with the punches (life happens), but you’ve done the heavy lifting—follow your budget and, with time, you’ll win financially. No guesswork.

This is a huge perk when you consider that, in a given day, we only have so much cognitive energy. And when you think of all the things we fill our lives with—jobs, friends, kids, neighbors, hobbies, and so on—it’s easy to see how precious that energy is.

There’s a study, conducted by Stanford psychologists Sheena Iyengar and Mark Lepper, that describes decision fatigue, which is the result of overstimulation that exhausts those precious energy reserves. In the study, they presented shoppers at a grocery store with a display of 24 varieties of jam. Shoppers who tasted a sample were offered a coupon for $1 off any jam.

They returned and repeated the experiment but, the second time, they only offered six varieties of jam. More shoppers approached the larger display, but when they tallied the purchases, they discovered that the smaller display actually sold ten times more jam. The conclusion? When given too many choices of jam, shoppers chose not to choose.

So, how does this relate to your budget? A lot of us tend to over-complicate things, especially our finances. We think that the more detailed or complex we make things, the better our results will be. But, you don’t want to do that with your money. If you really want a lasting change—one that you won’t ditch at the first sign of confusion (ahem, decision fatigue)—it’s much, much better to keep it simple.

An overly complicated budget will leave you scratching your head and wondering things like:

• What category does this money come from?
• Should I use this account, this account, this account or that account?
• What credit card should I use to pay at the grocery store—A, B, C or D?
• How do I maximize my points?

Rather than managing the churn of unnecessary questions, pare your budget down to only what really matters. What categories, goals and accounts do you really need?

You’ll notice, with time, that you’ll really be able to dial things in with The Four Rules. They’ll help you focus on the most important things so that, when a bill comes, instead of hemming and hawing, you won’t just know exactly what to do, you’ll have the money waiting!

Establish a regular budget meeting to review your simplified budget, and you won’t have to worry about things like, “Do I pay this bill with this paycheck, or put it off until next paycheck? Should I use the credit card? Should I buy this?”

… you’ll have already decided. You expend the energy to make decisions in bulk so that you can coast the rest of the week or month, acting out the choices you’ve already made. (Plus, in your budget meeting, you’ll have your whole financial picture in front of you which means you’ll make much better choices!)

That’s how you beat decision fatigue when it comes to your money. Focus on what matters and trust the priorities that you set during your budget meeting. This way, when circumstances inevitably present you with a choice, you can adjust your budget, as needed, with a clearer head.

If you need help simplifying your budget or establishing a regular budget meeting, check out our free, 20-minute online classes, including Learn the Four Rules, Your Budget Routine or Set Up Your Budget. And don’t forget to bring your questions!

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