How To Stay Motivated at Following Your Monthly Budget: A Lesson in Psychology

Posted by Fitz Villafuerte under Money Saving Tips, Personal Finance on April 15, 2015

One of my readers, Kristine sent an email recently to share something that happened to her. Below is a portion of what she wrote:

I learned about creating an emergency fund through your blog, which I was able to complete last year.

I’m writing to you because if not for that, I would now be in debt because my mother had a stroke last month and it was my emergency fund that paid her hospital bills and saved us from financial disaster.

Now I know the importance of having an emergency fund, thanks to you. And though all of it is gone, I am motivated and excited to build it again.

Kristine is fortunate that she learned how to be financially smart before that medical emergency happened. And now that she’s learned the value of having a contingency fund, I’m sure she’ll do her best to build it faster than before.

She’s motivated more than ever because she has experienced its benefits first hand.


For most people, hearing stories like that of Kristine’s would be enough to get them started in taking their finances more seriously.

However, anchoring our motivation on other people’s experiences would normally be not as strong as using one that is our own.

Kristine have been inspired to start saving because of my blog and the stories that I shared here.

But now, she doesn’t need those anymore because her own financial ordeal will be all that she needs to stay on track towards rebuilding her emergency fund.

Now how about you… are you saving money? Are you following a monthly budget? If yes, what is your primary motivation in doing so?

Is it simply because you know it’s the right thing to do? Or is it because, like Kristine, you’ve experienced how valuable it is to be financially smart?

Emergencies do happen, but it doesn’t happen that often. Meanwhile, the temptation to spend is always around, with mall sales happening as often as every pay day.

Given this reality, is there anything we can do to keep our motivation to be financially responsible always up?


In Psychology, there’s a heuristic called the peak-end rule. Wikipedia explains:

The peak–end rule is a psychological heuristic in which people judge experiences largely based on how they were at their peak (i.e., their most intense point) and at their end, rather than based on the total sum or average of every moment of the experience. It occurs regardless of whether the experience is pleasant or unpleasant.

According to the heuristic, other information aside from that of the peak and end of the experience is not lost, but it is not used. This includes net pleasantness or unpleasantness and how long the experience lasted. The peak–end rule thereby comprises extension neglect and duration neglect.


In layman’s terms, when we look back at certain events, we often judge the experience based on two moments – the most intense part and the last part – and often don’t give much weight on the rest of what happened.

If both parts (the peak and the end) were pleasant, then our bias would be to say that it was a pleasant experience, or vice versa.

For example, you went on a romantic date in a restaurant. During dinner, your date told a joke that had you really laughing. Then at the end of the night, the two of you shared a romantic kiss before parting ways.

When a friend asks you how your date went, you’d be most inclined to say that it went very well because the laughter (peak) and the kiss (end) would be your strongest memories of the night.

And you would neglect the fact that you had difficulty finding a parking spot, that you waited 30 minutes to be seated, that the food was dull, and that the service was slow.

That’s how the peak-end rule happens in real life.


What does the peak-end rule got to do with personal finance?

Well, you can actually use this cognitive bias as a strategy to stay motivated with your smart money habits.

As an illustration, let’s consider the act of following a monthly budget.

If you want this to be a pleasant experience, then you’d have to feel good about it sometime during the month (peak) and finish strong each month (end).

To do this, you can reward yourself on the 15th to feel good about sticking to your budget for the past two weeks. Then at the end of the month, you can finish strong by depositing money to your savings or investment account.

The mid-month reward can be eating at your favorite restaurant, or buying yourself something nice, or treating your loved ones out to dinner – whatever act that will make you feel good about having extra money because you’re following a budget.

Meanwhile, actually seeing your savings or investment account grow a few thousand pesos will be the strong finish that will cap off the end of the month because that is always an empowering experience for anyone.

So when the new month starts and you’d need to plan your monthly budget again, the peak-end rule will trigger and you’ll remember how it felt good to be in control of your finances.

And thus, you’ll be motivated and encouraged to do it once more.

Did that make sense? I hope it did. And do try it because it actually works for me.

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Photo credits: funfilledgeorgie, vinothchandar and shavar


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4 Responses to “How To Stay Motivated at Following Your Monthly Budget: A Lesson in Psychology”

  1. Maria says:

    So like this article. 🙂 Keep it up!!!

  2. maan says:

    Motivated saver on track. Thanks!

  3. reynaldo lintag says:

    Educational article and interesting to share. Thanks

  4. roxanne says:

    this is exactly what i need! i so love this article.THANKS SIR FITZ!

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