My Simple Budget Hack That Helps Reduce My Scarcity Mindset / by Jennifer Chan


When I first began budgeting, I felt completely overwhelmed. I didn’t know how many categories to use, let alone how much money to properly allocate to each. As I previously mentioned, I first started bi-monthly budgeting and then moved to monthly budgeting.

After two years of consistent budgeting, I determined that having a budget that's too restrictive can significantly impact your motivation. So, I found one small hack that will make budgeting a lot easier.

Consolidate Your Expense Categories

I find that this mostly works with your variable expenses rather than your fixed expenses, but your variable expenses are going to be your biggest problem areas.

My Previous Variable Expense Categories:

Dining Out
Public Transportation
Personal Spending/Healthcare
House Supplies
Car Maintenance
Miscellaneous/Oh Sh*t Fund

That’s 11 categories.

Every time I blew threw one of the categories, I felt like I was bad with money.

“Why couldn’t I just stay in my lane?”
“Did I really need to buy that extra pack of Oreos?”
“Ugh, this is so hard, I give up.”

To compensate, as one does, you start to borrow money from other categories. This is a perfectly fine strategy, and one I still do occasionally, but calculating that can end up being pretty time-consuming.

Instead, I eliminated certain categories and made my variable expenses much simpler.

My Current Variable Expense Categories:

Public Transportation
Personal Spending
Enterprise Car Share
Miscellaneous/Oh Sh*t Fund

That's 7 categories.

So, obviously I still need to buy the exact same items. It’s not like I have just stopped purchasing hand soap. But I realized that my girlfriend & I tack on our house supplies into our grocery expenses, so I was mostly paying for them out of my grocery budget anyways.

Same goes with entertainment, dining out and buying coffee. I still do all of these things, but I see no reason to have a separate coffee, dining out and entertainment category. All three things are technically indulgences. I now give myself the freedom to figure out how I want to spend that money.

Of course, I no longer have a car, which eliminates two categories. But when I do become a car owner again, I will definitely just amalgamate my “gas” and “car maintenance” categories into one. That still leaves me with only 8 categories.

The Benefits

This little trick not only simplifies things when I'm tracking my daily spending, but saves me so much time when I’m tallying everything up at the end of the week. I can easily see what’s left in each category, and am less inclined to borrow money from other categories.

On a psychological level, it’s also improved my motivation. I no longer feel guilty that I quickly maxed out a category, because my categories now have bigger funds in them. Instead of giving myself a $20 coffee budget, I now have $200 of indulgence spending, which means I can spend $5 or $50 on coffee. It's really whatever I feel like.

Now, some of you may be thinking that this may cause opposite problems (especially for spenders) – artificially inflating how much money you have. I'm not really concerned, because in the end you’re working with the same amount of money. You’ll have to decide for yourself what works best for you.

But as someone who used to constantly suffer from a scarcity mindset, I find that this small hack really helps make me feel that my choices are not restricted by low numbers that span multiple categories. 

In the end, I strongly encourage incorporating simplicity and flexibility into your budget, so that managing your money not only becomes easier, but also a much more liberating process.