Why Good Habits Are Better Than a Strict Budget

If you’ve ever tried and failed to stick to a budget, you can take heart in the fact that you’re not alone. We’ve all been there, myself included.
It’s also pretty likely that you were given some bad budgeting advice that at least partially led to your failure.
See, traditional budgets focus on setting limits. You’re only allowed to spend this much money on groceries each month. You can only spend that much money on eating out. If you go over those limits, you messed up.
That approach is well-intentioned. After all, most of us really do have some limits to how much we’re able to spend each month without running into trouble.
But there are some fundamental weaknesses to using limits as your main budgeting strategy:
- Limits are mentally defeating – It’s you vs. your spending limit, which makes the whole budgeting process feel like a fight. That’s not a recipe for success, and it’s really not what budgeting is all about.
- Limits are often arbitrary – Especially if you’re new to budgeting, it’s almost impossible to know what your spending limits should be. And even if you’ve been budgeting for a while, each month brings different circumstances and therefore potentially different limits. All of which means that any limits you set are fairly arbitrary and may be setting you up for failure right from the start.
- Limits are stressful – You have to constantly check to see whether you’re within your spending limits, which takes time and mental energy and adds stress to your daily life.
- Limits don’t tell you what to do – Limits don’t do anything to address your behavior, which is the root cause of your spending and saving patterns.
Luckily, there’s a better way to take control of your money. One that’s easier, more effective, and a lot less stressful.
The power of habit
Your habits are the things you do every single day without thinking. Things like turning off your alarm clock, putting your clothes on, and checking your phone when you’re bored.
These things are so ingrained in your life that they’re effortless. You don’t have to remember to do them or even think about them when they’re happening. They’re basically just an automatic reflex.
And if they’re harnessed correctly, habits can be an incredibly powerful force for positive change. Because every good habit you create not only makes your life better, but it does so in a way that’s both repetitive and easy.
In other words, good habits allow you to make continuous positive progress without any ongoing effort.
It can certainly take some time and effort to create a new good habit, and that can absolutely be challenging. But once the habit is in place, you can continue to reap the benefits for the rest of your life without even thinking about the fact that you’re doing it.
Creating good financial habits
So, what does that have to do with budgeting?
Well, whether you know it or not, you already have a number of financial habits. How you shop for groceries. What you pay for cable. What you do with your family on the weekends. How you save money. Those are all habits that determine where your money is spent, and therefore affect your ability to reach your financial goals.
Some of your habits are helping you effortlessly make progress towards those goals. And some of your habits are mindlessly working against your goals.
So the opportunity you have is this: every good financial habit you create allows you to make continuous progress towards your biggest goals without any stress or ongoing effort.
Here are some examples of habits that might allow you to make effortless progress:
- Automating your savings so that a set amount of money is put towards your biggest goals every single month.
- Packing a lunch each morning before work.
- Creating a default grocery list of the major items you typically buy and working off that list each week.
- Scheduling a 1% increase in 401(k) contributions every 6 months.
- Defaulting to family activities that are either free or low-cost, like going to the park or playing games you already own.
- Switching to a lower-cost cell phone plan or cutting cable, resulting in lower bills that save you money month-after-month.
- Dedicating half of your raise each year to savings.
None of those habits require you to set limits that you then have to remember and fight to fit within.
All of those habits will either reduce your expenses or increase your savings in ways that become effortless to repeat once the habit is formed.
Effortless progress. Doesn’t that sound nice?
Make your habits count
Focusing on habits instead of limits has two big benefits:
- It gets right to the root cause of your spending and saving patterns: your behavior.
- Each habit requires a one-time effort to create, after which you can continuously and effortlessly reap the benefits forever.
When the things you do naturally are also helping you make progress towards your biggest financial goals, life is good.

Totally agree – budgets are great but can be limiting. If your habits don’t support your budget, then it’s going to be that much harder to follow. Improving your habits to support a better financial lifestyle is great way to focus on your financial health.
You make such a good point! I think habits are way stronger and will be more consistent over time than putting a limit on what you can spend. Over time, I think that person will feel deprivation and might even go overboard at some point.
Totally agree – never had a budget. Other than mortgage and small student loan (about $3K), debt free. Good habits include, non-smokers, frugal shoppers, minimalist living (but comfortable), savers. Not perfect, we have cable, landline and cells, all necessary though for hubby’s job. Self discipline essential if you want to have good financial health, among other things.
Thanks for sharing Suzie! Staying debt-free is a real achievement.
Such a good reminder. I only kept the minimum (about $400) in my savings account. After a few emergency car repairs, I worked hard to pay off my credit card and started saving so I could handle the next emergency. It started small–$20 a month–and while it hasn’t increased tremendously, I have a lot more peace of mind. If I hadn’t started the habit then, I’d probably still only have that same four hundred in savings, instead of a few thousand. The smallest contribution to savings is more than nothing!