Why Budgeting Doesn’t Work

Jerry Fetta
8 min readMay 27, 2024

One of the questions I’m asked most about is how to properly do a budget.

I’ll be honest with you…even I hate budgets. It’s tedious, it is restricting, and every time I’ve gotten overly focused on a budget it actually has put me in a bad mood where I became worried about finances and worried about what I can or can’t afford.

And the reason is that most people budget backwards. And it’s okay, that’s how I was taught to do it too.

Tell me if this sounds familiar.

Money gets deposited and the month begins, and we do 1 of 2 things:

1. We sit down and look at how much there is and how much we can spend. We realize that it’s pretty tight so we look at what we can cut back on and then spend the rest of the month trying not to overspend. Usually, we save very little or we save nothing and if we do save something it’s often what’s “left over” at the end of the month.

2. The money comes in and we don’t do a budget and at some point, during the month we notice the bank account is getting pretty low or maybe the credit card balance is getting high. So, we then do a half-way budget and try to make do with what’s left. Usually this means no money gets saved.

The reason this system doesn’t work is that the focus is backwards.

A person operating this way is basing their monthly plan off of their expenses and attempting to spend less to have more money. This directly restricts quality of life and it doesn’t actually build wealth. You can’t build something by reducing something. You have to add to it.

The correct way to do this is focusing on adding more income. Now easier said than done, right?

Let me share a Law of Wealth that will help tremendously on this one:

Income is the gas pedal. Always earn a LOT more than you spend and always earn it before you spend it.

You see, traditional budgeting may focus on the last half of this law, which is to always earn it before you spend it, but it overlooks the first part: Income is the gas pedal and to always earn a LOT more than you spend.

The battle cry of budgeting for centuries has been “live below your means” or “decrease your means”. It’s all about making your expenses littler than your income, which fails to take into consideration that spending less than an already small amount doesn’t build wealth and it doesn’t improve quality of life for yourself, your loved ones, or the world around you.

I don’t want you to live below your means. I want you to grow up, and namely, your income.

This doesn’t mean not to have control over your expenses, but it means that control over your income is much more powerful than control over your expenses.


Because it is repeatable and the more you do it, the better your life will be.

This isn’t true of control over expenses. You can only reduce them down to the point of being homeless and the more you do that, your life will not be better it will be worse.

In fact, I believe all the sayings like “I don’t need all that” or “money isn’t everything” or “money can’t buy happiness” come from the misunderstanding of budgeting and the attempt to live below one’s means. If someone believes their only point of financial control is to spend less than they make and to reduce costs, as we’ve discussed, they’re going to decrease their quality of life. And someone who has to decrease their quality of life and who sees no way out and no other strategy is going to have to make sense of the strategy they’re using. They will begin to make sense of going without by saying “I don’t need all that”. They will make sense of not buying the things that would make them happy by saying “money can’t buy happiness”. They will make sense of not having the things they want and need by saying “money isn’t everything”. All the while, they just need to change their viewpoint and go earn more than they spend rather than trying to spend less than they earn.

From here on out, I actually want you to get rid of the word “budget”. We’re going to start referring to it as “The B Word”. I want you to replace The B Word with the word allocation.

I’m going to show you how I use Allocation instead of the B Word to control my finances and build wealth.

1. Set an income target for the year

2. Break it down for the month so that you can achieve your yearly income target

3. Write down the dollar amount you spend on anything and everything in your life. The best way to do this is to get all of your bank and credit card statements for the last 90 days and total up all expenses per category just like you would do if you were doing The B Word. You should have your average monthly expenses for every category over the last 90 days.

4. Do the same with your net income (take home) over the last 90 days and see what you total household monthly average is.

5. Take each expense category such as groceries, housing, insurance, pets, childcare, personal grooming, etc. and divide the average monthly amount for that category by your average monthly income. For example, if you spent $1500 per month on average on groceries the last 90 days and your average household income was $10,000 that means you spend 15% on groceries. This 15% now becomes your grocery Allocation. Each and every category will result in a percentage of income spent on that category and will serve as your Allocation to that category. You should have a list of expense categories and percentage of income allocations for each category now.

6. Add an expense category titled “Sacred” and pick a percentage of your income that you will set aside into that category. You should be doing a minimum of 10–15x your age per month. If you’re 30, you allocate no less than $300-$450/mo. to this category. Divide this dollar amount by your income and you’ll see your percentage allocation for wealth. You are going to start paying yourself first in your Sacred Account before all other expenses. Why is it called Sacred? It is special and set apart from all other expenses. This is the money you are going to allocate toward achieving Financial Independence and you will not fail to set it aside and you will not use it for anything else. It is Sacred.

7. 100% of your income should be allocated based on percentages. These percentages of income equate to the dollar amounts you can spend on each category each month. Every time you get paid, you calculate the set percentage of the money that came in, first to pay yourself first in your Sacred Account, and allocate the rest of your percentages to your expense categories. You can literally setup sub-accounts at your bank for all categories, or you can use an B Word app to build categories, or you can simply use an excel spreadsheet. If you really want to go old school you can use cash in envelopes.

The system here is pretty simple. You earn income, a fixed percentage of it first goes to pay yourself and then you allocate the correct percentages to other expense categories and you pay your expenses with those amounts.

Now you’re probably thinking, “Well Jerry, that’s cool and I’m glad I’m paying myself first and everything, but this seems pretty much like The B Word.”

Hang on, we haven’t gotten to the good part yet.

Remember how I said you were going to set an annual income target? Well, your target should be to increase your income. If you increase your income and all of your expense allocations are based on percentage of income, this means you get to spend more on each category as the income goes up.

Life becomes fun!

It becomes a game to increase income because you’re paying yourself first in your Sacred Account and being responsible, so you’ll feel great, plus you have permission to spend more and more as your allocation goes up.

When I finally cracked the code on this and changed over to this system, I got tell my wife that we now have an allocation for household decorations. She was ecstatic! And as our income has gone up, she has gotten to spend more and more.

I also have an allocation for myself and for her just for our own personal fun. I spend most of mine on cigars and cool shoes (I’m a cigar guy and a shoe guy). She spends hers on things she wants such as beauty products and Amazon purchases.

We created an allocation for our son and he has a points system for doing chores around the house and for doing things in public that give a good impression about our family and parenting. If he has more points than the week prior, he gets a very small allocation of the income to spend on outings and the things he wants and needs (instead of an allowance). He has a Sacred Account too and he pays himself first too.

Now, I’m going to give you 1 cool trick here. Use a 1–3% cashback credit card to actually spend the money. Then make weekly transfers from your allocations to pay off what you spent. This adds an additional 1–3% income to everything you spend and just with that, you get a higher allocation for the next month.

Money should be fun. When it isn’t, it’s because a natural Law of Wealth is being violated. All you have to do is correct that and it becomes fun again. It will take training & study. It will be work to carry it out and change behaviors. But it will be worth it!

In closing, my mission in life is to help good people build more wealth who make the world a better place.

So, if you’re a good person who wants to help make the world a better place and this article helped you, I want to encourage you to join our free Facebook community, Wealth DynamX Nation.

I want to encourage you to start putting this into practice. And feel free to write to me and let me know how it went. Or if you’re a client of mine and you’d like help leveling up, send an email to my team with “Level Up” in the subject line to Contact@WealthDynamX.com.

If you’re a follower and have not read my book The Blueprint to Financial Freedom yet, that is the place to start. This book covers the specifics for each level in the various chapters and you can grab the book for free as my gift.

Click here to get a copy!

The Blueprint to Financial Freedom by Jerry Fetta

To Purpose, Wealth & Freedom,

Jerry Fetta

Jerry Fetta is the CEO and Founder of Wealth DynamX. He is a nationally recognized financial expert featured in Forbes, Yahoo Finance, Fox, Chicago Weekly News, New York Finance, interviewed on 100+ podcasts with world renowned experts, earning endorsements and affiliations throughout his career with names like Kevin O’Leary, Grant Cardone, Dave Ramsey, and Pamela Yellen.

Jerry’s mission in life is to help create millions of financially educated and solvent families achieving greater financial freedom and sharing the truth about money with those around them.

Learn more at www.WealthDynamX.com

(DISCLAIMER: The information in this content should not be considered tax, financial, investment, or any kind of professional advice. Only a professional diagnosis of your specific situation can determine which strategies are appropriate for your needs. Wealth DynamX can and does not provide advice unless/until engaged by you.)



Jerry Fetta

Jerry Fetta is the CEO and Founder of Wealth DynamX. Jerry’s mission in life is to help create millions of financially educated and wealthy families.