Living with credit

Why budgeting beats coupon clipping

Kelly Dilworth

While clipping coupons and hunting for deals is more fun than sticking to a budget, you’ll save more cash if you create a budget before you shop, according to a new study in the Journal of Consumer Research.

“Budgeting makes it very clear how much you have to spend, making it difficult to deceive yourself into thinking you can accomplish more than you can,” write study authors Philip M. Fernbach, Cristina Kan and John G. Lynch, Jr. in a March 4 news release.

Because it requires you to think through your purchases ahead of time, you’re less likely to overestimate what you can afford. People who solely rely on shorter term saving strategies, such as bargain hunting, by contrast, tend to be more prone to overspending because they’re less aware of what they spent.

“Ambiguity causes people to be flexible in their mental accounting to convince themselves that a purchase is justifiable,” write the authors in an early version of the study. When you don’t know how much money you have stashed away in your account, you’re more susceptible to self-deception, especially if you really want to buy something.

“Setting budgets and tracking expenses decreases this type of ambiguity,” write the authors, making you less prone to over-optimism. Creating a budget ahead of time also “forces you to make tradeoffs sooner, before the situation is too dire,” the authors add in the release.

Budgeting works — if you invest the time to do it right
I can relate. Before getting married, I rarely budgeted and relied on a haphazard system of looking at my previous transaction history and resolving to do better if I overspent.

Because I never really knew how much cash I had available, I mostly relied on memory and intuition when deciding whether or not to buy something. If it felt like I had been spending a lot of money lately, I would temporarily cut back. But if I convinced myself that I had been good that week (say, by eating out less or by resisting a bigger purchase), I routinely splurged the rest of the week on smaller dollar purchases.

As a result, I almost always had a credit card balance and was chronically short of cash. It wasn’t until I married my husband, a habitual saver who’s been keeping a budget since he was a teen, that I cleaned up my act and began keeping track of my expenses.

Our particular budgeting system is time consuming and intense, but it’s also surprisingly effective. We budget money each month for every conceivable expense, ranging from household necessities, such as trash bags and batteries, to birthday gifts for family and friends. We also use Quicken to track and catalog our purchases. That way, we aren’t blindsided by small expenses that add up quickly.

Because our budget is so comprehensive, we rarely spend more than we anticipated. In addition, we frequently have money left over in different expense categories — such as clothing and entertainment — that we can later use to splurge on bigger purchases.

Even better, budgeting has given me a much clearer picture of our finances than my imperfect memory and so I often find that I can afford more than I anticipated, rather than less. It helps, too, that budgeting forces us to save more upfront and avoid making mindless purchases, so I typically have more to spend when it’s finally time to buy.

The downside is that sticking to a budget can be draining, especially if you have to spend significant amounts of time thinking through what you can and cannot buy. In the study, Fernbach, Kan and Lynch found that people frequently dislike budgeting because it’s emotionally painful to decide what you’ll have to do without. Coupon clipping and bargain shopping, on the other hand, are less effective at helping people save money in the long run, but they also tend to be more fun.

I understand that, too. I groan whenever it’s time to sit down with our budget and would rather shop a sale rack than think about what I can and can’t afford. But I promise you it’s worth it. Sticking to a budget has not only reduced my financial anxiety and given me more confidence, it’s also made shopping a better experience when I do finally make it to the store because I’m not plagued with guilt every time I swipe my card.

Join the Discussion

We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, we ask that you do not disclose confidential or personal information such as your bank account numbers, social security numbers, etc. Keep in mind that anything you post may be disclosed, published, transmitted or reused.

The editorial content on is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company's business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.