Being Financially Responsible With ADHD - How To Reduce Spending & Improve Money Management

ADHD and finances don't mix well. 

In fact, managing your money with ADHD is such a huge challenge that there is a whole term for the pain you may be going through called the ADHD tax.

This term refers to the loss of money and wasted financial opportunities as a result of ADHD symptoms, like impulsivity, poor organization and time management, forgetfulness, and a strong desire for new, shiny, and exciting items and experiences at the expense of sound financial decisions. 

This article will help you create an ADHD-friendly budget system and give suggestions on how to avoid unnecessary and wasteful spending.

Why Budgeting & Tracking Spendings Is Mandatory 

If you are serious about spending your money well, keeping a budget and tracking your spending is non-negotiable. This is necessary because there is a huge gap between how we spend money and how we believe we are spending money. You spend, shrug it off, but the cost doesn't disappear even if you forget about what you purchased. 

For instance, buying a few items you don't really need for a new hobby you won't spend more than two weeks on isn't the end of the world. It's one tiny and innocent mistake, but what happens if it happens over and over and over again? Your wallet can endure one financial oopsie, but a few dozen and now you have created a disaster. 

If you don't believe me, I want you to do the following experiment - track everything you purchase for a whole month. Combine all the small purchases ($5 to $10) and calculate the total sum. Calculate how much you have spent over your expected amount or/and how much your debt has increased because you went over your monthly earnings. Gasp in disbelief (optional).

Steps for setting up a budget:

1. Pick a suitable software - Physical tracking is not very effective because you will have to track spending across weeks, months, and even years, so finding the right software is essential. There are apps, like Mint (free option) and YNAB (paid option), that people swear by because they offer convenience and useful features. If you don’t want to spend money and prefer a high degree of customization, use Excel, Google Sheets, or Google Docs. 

2. Set a specific number for earnings and expenses - For earnings, you write down your end salary after tax deductions. If you have any additional sources of income (side hustles, business projects, startups, freelancing, etc.), put a number at the lower end of your estimate range. It's better to be risk-averse and avoid situations where you exaggerate how much you get in a month. For spending, write down your fixed expenses (rent, subscriptions, credit repayments). For fluctuations in expenses (gas, water, electricity, food), write a number at the higher end of your estimate range. Anything that remains you can use for next month. 

3. Set saving goals - There are two types of spending goals. First, saving to develop an emergency fund. This is essential to cover periods of low or no income without significant stress and to avoid relying on predatory loans. Having savings for at least 6 months is a decent goal to set in the beginning. Second, after developing an emergency fund, you can set savings for purchases important to you (down payment for a home, expensive items, vacation, courses). To do that, get the total amount of the purchase and break it down into monthly amounts (a new laptop for $2500 would be 10 months of $250 saved each month). 

4. Set a portion of the monthly budget for casual spending - Even if you have developed an impeccable lifestyle and system for reducing impulses, you can't eliminate them altogether. It's better to have some fun in a controlled manner instead of pretending you can put all your leftovers into savings only to get desperate at some point during the month and break your promise. Furthermore, you are not a robot designed to optimize every single aspect of your life. Controlling excess spending and saving is important, but you don't want to go toward the other extreme. 

How To Reduce Impulsive & Unnecessary Spending 

Your budget is a blueprint for optimal financial decisions, but how you plan something can differ greatly from what happens in reality. For example, it is very common to go above your budget because you decide to buy something spontaneously.

You can't always control cravings and contain your impulses, but you can certainly design rules and systems to reduce impulsivity and make it harder to act on them. 

Here are a few suggestions:

1. Don't give yourself a hard NO - Managing your impulses is a negotiation game. If you shut down your ADHD brain's cravings and call it stupid, it is obviously not going to cooperate. This is why you can use many mental rules to promise that the purchase will happen under specific circumstances. For example, the rule of 4 is a classic impulse management tactic where you wait 4 weeks to make a desired purchase. By waiting so long, you can better understand if you really want and need something or if it was a superficial attraction for a few moments. 

2. Create a mental filter checklist - There is a difference between wanting something (it would be nice to have it) and needing something (your life would be much easier if you had it). The problem is that we often trick ourselves into believing we really need something, even if we actually don't. After all, needs are much more pressing and important, so you reduce the guilt and shame by tricking yourself. You can create a simple checklist of questions to help you remember the crucial differences. For example, a) will not buying this affect my ability to make money and pay the bills? b) will not buying this negatively affect my physical and mental health? c) what is the lowest price for which I can buy it to get the functions I am looking for? d) are there any alternatives that I can use instead, like items I already own or can borrow from others? The beauty of those filters is that they not only cut through the bullshit but they give you enough time to calm down your impulses while going through them.  

3. Do not have credit cards - In theory, you can be responsible and pay off the debt every month. In reality, having the unlimited ability to spend, as if you have the cheat codes in a video game, is bound to lead to unnecessary purchases. If you can cut credit cards from your life, you will reduce your total spending and any painful interest you will have to pay when the debt inevitably gets larger. There are obvious exceptions to this option. For example, the USA's system is so ridiculous that you must use credit cards to maintain a good credit score. So, an alternative is to keep a credit card for one or two specific monthly purchases, like gas. 

4. Transition slowly and find suitable alternatives - Even if they didn't align with your financial goals, your purchases and spending habits had a function. It will be very challenging to stop them altogether without finding suitable replacements to fill the gap. For example, going out with friends fulfills your need to socialize and connect with people, so you can invite them over to your place or find cheaper ways of hanging out. It will also be easier if you don't stop altogether. So, if you are used to going out every night, you can cut it to twice a week in the beginning as you seek alternatives.  

5. Use certificates of deposit (CDs) and other investment options instead of saving accounts - Banks have options for you to deposit money for an agreed-upon time period and receive interest based on the amount you deposited and how long you need to wait before retrieving them. This is an excellent way to create a barrier to impulsivity because withdrawing the money preemptively will lose you the free money you were getting through interest payments, and you will also have to endure any associated fees for not waiting until the end of the contract. 

6. Learn about your triggers - You could spontaneously feel the urge to buy some new fitness equipment to make working out from home easier. However, your impulses become much stronger and more frequent if you watch YouTubers advertising products or constantly get targeted advertisements. There are many other triggers: boredom and dullness after running out of work projects, higher restlessness late at night, coping through anxiety episodes, or intense and painful emotions. If you have a purchase that breaks the budget, and you retrospectively find it unnecessary, write down somewhere what you felt like, what you were thinking, what you were doing, and what was going on at the time before the purchase. You can track all such purchases in one document, making it easier to spot patterns.  

7. Buy multiple items at once if you are going to splurge - This may seem paradoxical, but hear me out. You buy unnecessary items because you think with your brain's interest-based system (what will be the most enjoyable) instead of evaluating based on importance (what do I need to make my life better). If you are buying items at once, you are already getting a huge dopamine spike, so it can be easier to nitpick and critically evaluate some items off the list. This strategy works best with the time delay we previously discussed (promise yourself to buy the item after a few days/weeks).

How To Make Money Systems Less Demanding And Challenging  

The right financial system allows you to make good decisions as quickly as possible while creating as many barriers as possible to harmful financial decisions. Here are a few strategies to consider:

1. Automate as much as possible - It doesn't matter if your brain struggles with money management on an everyday basis if you have automated many key decisions in advance. The fewer decisions you make, the fewer mistakes you can make. For instance, you can have separate banking accounts for bills and common expenses (rent, water, electricity, food, subscriptions), savings, and extra spending for fun. Make the distribution of your salary into those accounts and the payments you need to make every month automatically according to your allocated budget. 

2. Set as many reminders as possible - If you can't automate certain bills, you can make sure they are paid on time by setting reminders. One is not enough. Have a reminder a week, three days, and one day before it's due. Reminders should come with loud and annoying alarms, and you should get in the habit of automatically getting around to doing them once the reminder goes off. The system works as long as you are comprehensive, so you can set reminders way in advance if you have the time. To make it even more effective, synch your calendar with reminders across all devices so you can't forget.

3. Outsourcing and accountability checks - This works only if you trust that person with your life (significant other, very close family member, etc.) You can ask them to do a checkup for 15-20 minutes a week to see any gaps and irregularities in your budgeting. In more extreme circumstances, you can ask them to get your salary, pay the bills and other key expenses, set aside money into a savings account, and give you weekly transfers to avoid overspending. Again, accountability works only if you trust that person with your life because you put your finances in their hands. 

One overlooked aspect of reducing executive function demands is making what you are doing enjoyable. Aligning optimal financial strategies with your brain's interest-based nervous system can seem like a daunting task, but it's definitely possible. 

You can make almost everything that's boring feel more interesting. Some people get obsessed with making their money-tracking system as comprehensive and pretty looking as possible with impeccable structure, beautiful colors, and graphs. 

Another example would be investing in the stock market instead of putting your money in a savings account and forgetting about it. This alternative is a much more active and engaging process where you can do your own research on stock options, which gives you a huge incentive to save as much as possible. 

If you have the time, I would encourage you to dive deeply into the topic. Channeling your hyper-focus on the topic is one of the most effective ways to find enjoyment. Investing, being frugal and minimalistic, and finding the best deals to make the most out of your money are all massive topics with so much potential for research and practice. If you are addicted to social media, the content might as well be about something that will improve your life!

Conclusion 

Even with the best system in the world, you can still struggle with managing your finances due to a sudden crisis or ongoing challenges in various areas of your life that make your ADHD symptoms significantly worse. 

What happens in a day when you skip two meals, barely drink any water, don't sleep more than 6 hours, and move only to go from the bed to your desk? You are cranky, irritable, and highly impulsive—the polar opposite of the headspace you want to be in when making sound financial decisions. 

You crave the quickest and most intense form of dopamine. The elixir of life that will make you feel good, even if only for a few precious moments. So, you pull out the credit card and make a few quick purchases. There's no guilt when you can't immediately see the consequences and are too focused on the rush that you are getting.  

Similarly, you can't have the energy and motivation to budget and track your spending if you are suffering from chronic exhaustion and brain fog. You can't be bothered to save money at the end of the month if every excess goes toward numbing the pain and discomfort you feel with material possessions. 

You can only make so much progress by directly trying harder and implementing every financial system under the sun. Of course, there are always small wins you can have, no matter the situation, but when you are struggling, you should give yourself some slack. That's completely normal, and you shouldn't be beating yourself up. Every struggle is temporary, and you will always come out on top if you weather through the storm.