TikTok has quickly become many people’s go-to source for recipe ideas, style inspiration, organising tips and even personal finance advice.
And lately, a new approach to money management has been making waves on the platform: “loud budgeting.” Since the start of the new year, TikTok has been flooded with videos touting the benefits of this method and the best ways to make it work.
“Loud budgeting is a financial strategy where you share your money aspirations directly and not so quietly with the people in your life,” Derek Ober, a financial advisor with Northwestern Mutual, told HuffPost. “It’s a public commitment. Loud budgeting centres around the idea of telling others why you’re choosing not to spend money on something and being transparent about the reason you are saving.”
For example, you might say no to an expensive dinner or group trip and explain that it’s because you’re prioritising paying off credit card debt or saving for a down payment on a house. The idea is to proudly own your money consciousness.
“Until now, we usually saw people flaunting their money on social media rather than flaunting their financial struggles,” said budgeting expert Andrea Woroch. “Loud budgeting suggests you should speak up about your financial situation and make spending decisions that support your goals and match your current budget and needs. It’s making it socially acceptable to use your financial struggles as a reason to opt out of certain gatherings, trips or group gifts.”
But does this social media trend pass muster with experienced financial advisors? We asked some experts to break down loud budgeting and share their advice for implementing this approach into your everyday life.
Is loud budgeting a good idea?
“As a financial advisor, I think this trend is a great approach to managing your finances,” Ober said. “Telling others why you’re choosing not to spend money on something can both hold you accountable and provide positive reinforcement from other loud budgeters who are doing the same.”
He noted that loud budgeting offers a sense of camaraderie that makes it easier to say no to activities and expenses that don’t fit in your budget at the moment.
“Ultimately, I think this trend transcends the notion of talking about your budget as a reason not to do something, but rather it’s helping move the money talk in the right direction so that we can feel comfortable addressing previously taboo topics like debt,” Woroch said. “Until now, there’s been a negative stigma around talking about money and a lot of shame around debt.”
Hiding your financial struggles hinders your ability to make improvements for the future, he said. And if you’re worried about what other people think, you might be more likely to spend money on things you shouldn’t.
By contrast, Woroch noted, loud budgeting is “the anti-YOLO.” Plus, speaking out about your money issues gives you the chance to gather helpful information from peers who’ve been in similar situations. It might also bring you closer to loved ones and to your personal values.
“It’s easy to get caught up in mindless, lifestyle inflation that allows increased spending on things like food and vacations just because your income has increased,” said Jacqueline Howard, the head of financial wellness at Ally Bank. “Loud budgeting can help you realign your spending values with the things that matter most to you and rethink the why behind each purchase. A person may realise they are overspending only because that’s what their friends are doing, or it’s because of something they saw on social media.”
Are there any downsides?
Removing the shame and stigma from debt and budgeting conversations could help you live a more financially healthy lifestyle. But the loud budgeting trend could come with a few downsides if applied incorrectly.
“I hope we don’t see people leverage this budgeting concept in an effort to be cheap, such as skimping on tips to deserving service providers,” Woroch said.
She also emphasised the need to back up your “loud” words with action.
“It’s important that you don’t fall into the trap of being all talk,” Woroch said. “Taking action is key to improving your finances and this will require a detailed plan to make it happen.”
What’s the best way to implement loud budgeting into your life?
Once you’ve resolved to try to out loud budgeting, taking a mindful approach will help you stick with it and see real results. Some general guidelines to keep in mind:
1. Set specific financial goals.
“It’s best to identify specific goals you are trying to achieve for the year, so that you can articulate your intentions clearly to others,” Ober said.
Setting clear goals can also help you budget more effectively.
“Spending less and saving more are great goals, but they don’t give you much direction to follow,” Woroch said. “You need to know what you’re working towards, so be specific when setting a financial goals and then build a budget that includes realistic debt payments, savings, etc.”
2. Consider your values.
As you establish your goals and budget, take stock of the things that truly bring you joy and meaning so that you can implement them into your monthly spending plan and cut down elsewhere.
“A value-based spending plan considers your personal values, goals, and priorities, whereas a budget will track your monthly income and expenses,” Howard said. “When building out your spending plan, ask yourself, ‘What are your values? How do you define them?’ It’s easier to make decisions that align with your overall financial goals when you’re clear on what those values are.”
3. Communicate your needs.
“To practice ‘loud budgeting,’ talk with your loved ones and start discussing money matters with your kids and spouse,” said Michael Hershfield, founder and CEO of Accrue Savings. “This will ultimately help you learn and improve your spending habits.”
Set aside time and space to talk to friends and family about your financial goals, values and needs.
“Having an open and honest dialogue with friends and family might sound difficult, but you should never feel ashamed for sticking to your financial goals,” Ober said.
If someone gets upset when you say no to something because it doesn’t fit with your budget, have a dialogue about it.
“Make it clear this is not about them, but rather about you sticking to your goals,” Ober said.
4. Come up with alternative plans.
“While loud budgeting may seem positive when you start, you may start missing out on the fun stuff,” Woroch said. “When you have to dip out of a dinner or weekend getaway, come up with an alternative plan to spend time with your friends that doesn’t cost as much. Invite them over for drinks at your place, request everyone to BYOB. Set up a hike and picnic. Find a free event to attend.”
The key is to emphasise that there are many ways to make memories together and to put in the effort to come up with workable alternatives.
“You can suggest cooking at home with a friend instead of going out to eat,” Hershfield suggested. “Another idea is to walk together for 10 minutes rather than ordering an Uber.”
5. Be honest about gifts.
“Just like you’re encouraged to be honest about why you chose not to spend, be honest about your needs when it comes to gifts for birthdays, holidays or a life event like a wedding,” Woroch said. “Rather than create a registry full of kitchen goods you really don’t need, ask family and friends to contribute to a home down payment or student debt repayment.”
She suggested that new parents on a budget might open up a custodial account for their baby and ask that grandparents and loved ones consider making cash contributions, in lieu of expensive toys and birthday gifts, to support their child’s financial future. Many financial institutions and even brands like Gerber offer different custodial account options for families.
6. Try out new money-saving hacks.
“While loud budgeting suggests you need to make drastic changes in your spending on social events, you can find big savings without sacrificing by reducing monthly bills,” Woroch said. “This may even give you a little room to spend more on a dinner with friends.”
She recommended negotiating rates with current credit card providers, comparing rates with competitors and canceling unused subscriptions. Consider opening a separate high-yield savings account to earn interest on your money.
Once you start practicing loud budgeting, you’ll likely learn even more money-saving hacks from loved ones through your open conversations about finances. The potential for positive effects is seemingly endless.
Ober added, “I hope that loud budgeting lives beyond just being a trend, and more people are comfortable enough to be transparent with their financial goals and continue to hold themselves accountable.”