We earn $350k and have a detailed budget, so why can’t we save money?

We have two kids in private school, and have a household income of over $350,000. However, somehow, we still struggle to save money. In fact, we’re actually in debt. We’ve tried making detailed budgets, but that hasn’t ever really worked. I know we overspend, but we struggle to even talk about this as a couple, and aren’t able to get on the same page. I’m not sure how to move forward to fix this.

In my years of helping people become confident savers, I’ve never seen a budget solve this problem. It’s not a budgeting problem. If it was, your detailed budgets would have fixed this by now. So, what often surprises people, budgeting is rarely the first thing I teach here.

Locking yourself in to a strict budget can actually damage your ability to save money.Credit: Simon Letch

Firstly, the way most people “budget” is ineffective. For most people, budgeting means making a list of all your expenses as they currently stand, assigning a spending limit for each item on that list, and then hoping you will be able to force yourself to stick to that number.

I see this more as a wishlist. You’re wishing that this is what your spending will look like. If that’s what you mean by budgeting – it won’t work. Not sustainably, anyway.

Maybe for the first week, you’ll be vigilant with your spending. But then life will happen – a new project at work, someone in the family gets sick – and you’ll lose focus. You will return to your default, habitual spending patterns.

Quickly, that budget gets forgotten. By the end of the month, you haven’t stuck to your budget, you feel like a failure, so you make another budget and tell yourself “this time I’ll stick to it.” But you don’t.

Your spending is not driven by a spreadsheet. It’s driven by you – your habits, behaviours, decisions, choices, mindset.

It’s a demoralising cycle that wears away at your self-confidence. You might start to develop negative beliefs like “Saving money is so hard” or “I’m just not good with money.”

The reason this strategy fails is because you can use a spreadsheet to gain an accurate picture of what’s happening, but the spreadsheet (or app) itself isn’t dictating your spending, it’s simply reflecting it.

Your spending is not driven by a spreadsheet. It’s driven by you – your habits, behaviours, decisions, choices, mindset.

How to (actually) save money

There are two key changes I’ve found to be the most effective in helping people improve their ability to save money, sustainably long-term.

The first is creating what I call a “streamlined savings system” (or money machine). This is where you organise your income, expenses, savings (and even investments) in such a way that your income is automatically distributed to pre-determined areas as soon as it comes in.

This will mean that your bills are automatically paid, and a portion of your income is automatically set aside for savings (and investments) as soon as you get paid.

You don’t have to get to the end of the month “hoping” there will be some leftover because your system ensures your money gets saved upfront. You don’t have to micromanage every dollar, worrying that it might throw out your detailed budget because your system automatically allocates money to all the important areas of your finances, ensuring there’s always enough.

The second is developing a “values-based approach” to spending. This is where you gain clarity on your most important values, goals and priorities and align your spending with them.

If you start to think about your spending as a reflection of your values, you might look at those detailed budgets you’ve created differently. What does your spending say about your values? Is that aligned to what you say you value? How can you better align your spending to your values?

For example, if health is important to you – how does your spending reflect that? If you’re spending a lot on eating out, are you currently valuing convenience or taste more than health?

Or if family is important to you, maybe cooking and eating meals as a family would reduce your spending whilst actually increasing your resource-allocation towards family togetherness?

This approach to spending tends to increase fulfilment (because you have clarity on what drives the most value for you), improve your spending efficiency (because your mindless spending will reduce as your spending becomes more intentional), all without feeling like you had to sacrifice or deprive yourself (because you’re only giving up the things that are not important to you).

So, the good news is there is absolutely hope for you. You can save money, without a restrictive, overwhelming budget that you can never quite seem to stick to. You can save money, without feeling like you need to micromanage every single dollar, all the time.

The combination of a streamlined savings system, and a values-based approach to spending will get you there.

Paridhi Jain is founder of SkilledSmart, which helps adults learn to manage, save and invest money through financial education courses and classes.

• Advice given in this article is general in nature and not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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