Budgets are a lot like diets. We have a vague sense that they are good for us. We commit to getting on one. We start them with great enthusiasm. They are forgotten in less than a month. We throw up our hands in defeat, feel bad about ourselves for a while over our failure, and drown our sorrows by binging. After a while, our waist lines expand. Our wallets contract. And the cycle resets and repeats.

There is another point of commonality worth mentioning: Diets and budgets are badly misunderstood by the majority of people who attempt them, and even more misunderstood by the people who don’t. Here are a few reasons why budgets fail, and what we can do about it:


Education Deficit



When it comes to matters of finance, and nutrition, for that matter, Americans have a crisis of education. It seems reading, writing, and arithmetic suck up all the oxygen in the classroom, leaving very little for anything else. But make no mistake about it; a lot more is needed. Perhaps we could do with slightly less Hemingway, and a bit more Economics 101. 

Here are some shocking facts about the state of economic education in the U.S.:

  • Only 17 states require a high school course in Personal Finance.
  • And only 22 states require a high school course in Economics.
  • Number of states requiring student testing in economics has dropped from 27 to 16 since 2002.
  • Only five states require a stand-alone course in personal finance for high school graduation.
  • Fewer than 20% of teachers report feeling competent to teach personal finance topics.
  • In 2010, more individuals filed for bankruptcy than graduated from college

While going back to school is a nice idea if you can manage it, the more practical choice is to utilize freely available resources designed to help adults fill in the gaps left by the public school system. 

Personal finance websites like Kiplinger or Banking Sense, can get answers to basic questions like Can You Lease A Used Car to more advanced queries like Differences Between Traditional vs. Roth IRAs. It is nice to have places online that can help you sort out financial issues without having to pay $50 and hour for an advisor, or $50,000 for an MBA.

Keeping Up With the Joneses 

Next to the lack of economic education is the peer pressure of keeping up with the Joneses. In fact, this may even be a bigger driver of poor personal finance habits. It is one thing to have will-power and discipline in a vacuum and quite another to have it in a crowd. 

If everyone in your neighborhood has overspent on Christmas lights, you don’t want to be the one holding down the average. You almost have to do something elaborate just to be unnoticed. Opting out means standing out. As the old Japanese proverb goes, the nail that stands out gets hammered. 

But when everyone is trying desperately to look more affluent than they are, then we are all going in debt trying to keep up with a false standard. At some point, someone has to risk being honest about their true financial status. You can’t afford the big light show. You can’t afford the new wardrobe. And you can’t afford the latest iPhone every year. When a few respected people own that fact, others will be emboldened to follow.

Smaller and Less

These words are generally viewed as negatives in America. Bigger and more are always better than smaller and less. Rather than asking, what is the biggest house you can afford, ask, what is the smallest house you can live with. Rather than, how much more can I fit in the grocery cart, ask, what items can I remove

In the wealthiest nation in the world, personal finance can be a real challenge, especially if you are not in the higher income bracket. A poor person has to spend money like there’s no tomorrow. They have to concentrate on the needs of the moment. The wealthy have the luxury of planning for a profitable future. 

Change will not be easy. But when more people file for bankruptcy than graduate from college, change is necessary.

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