Want a Bigger Bank Account? Try Split-Brain Budgeting

We pinch pennies on groceries while splurging on handbags when different brain regions drive decisions. Learning to bring them into balance may help us build wealth.

Published May 16, 2024

photo collage of grocery bag and designer purse on balance beam on top of brain

AARP (Getty Images, 4)

What is your favorite way to save money? What splurge is totally worth it? Share your ideas in the comments below.

Do you go to early bird movies to save money on tickets — but don’t think twice about dropping $11 on popcorn at the concession stand? Are you convinced there's no room in your budget to save consistently, yet last month you managed to squeeze out money for a fabulous pair of shoes — and new bedding the month before? How about booking cheap flights but buying overpriced food at the airport?

If any of this sounds familiar, sis, you are not alone. This dual approach to spending — scrimping and saving in some areas while splurging in others — has a name: split-brain budgeting.

What is split-brain budgeting?

In the aftermath of the pandemic, more and more people are cutting back on the essentials.

According to a survey from Harris Poll, in 2023, about half of American consumers either searched for discounts when shopping or bought household basics at a dollar store. Other habits we engaged in to save money included skipping social events, reducing transportation costs, sharing passwords for streaming services and joining buy-nothing groups. About 81% of Americans used at least one money-saving strategy last year.

But along with all this penny-pinching, we also splurged — 54% of us treated ourselves last year — with Gen X and Baby Boomers indulging in high-quality home goods, upgraded hotel accommodations, luxury fashion items and high-end beauty products.

This contrasting approach to our spending has become so widespread that experts have labeled the phenomenon split-brain budgeting.

When we practice it intentionally, split-brain budgeting makes sense. We can’t splurge on everything and certainly don’t want to cut back everywhere.

But we often engage in split-brain budgeting without realizing it, making irrational spending decisions, like owing money on your electric bill but using your tax refund to buy a new television.

The science behind split-brain budgeting

This tug-of-war between conscious and impulsive spending reflects how the different parts of our brain are responsible for distinct functions.

The prefrontal cortex, sometimes called the “thinking” brain, is responsible for logical and rational decision-making. It’s the part of our brain that processes information, allows us to exhibit self-control, plan for the future and make analytical choices.

On the other hand, the limbic system represents the “feeling” part of our brain. It houses the amygdala, which is responsible for our impulsive thinking and emotional responses.

So, our spending choices can happen on both the logical and impulsive levels.

That is why our brain can make a rational, forward-thinking decision like setting up automatic contributions to a 401(k) and an irrational, instantaneous one like dropping hundreds of dollars on concert tickets even when we don’t really have the money for them.

How split-brain budgeting can affect your finances

The prefrontal cortex and the limbic system can complement each other and work together wonderfully when they coordinate (how about contributing to that 401(k) and creating a “fun fund” that you can spend any way and whenever you want?).

But sometimes, one area of our brain can dominate our thinking and actions. This is particularly true when our brain is flooded by dopamine, the feel-good chemical in our body that gives us a sense of pleasure and wants to recreate the path to that sensation.

Here are a few ways split-brain budgeting can work against us.

● We make illogical tradeoffs. We make choices that make sense to the part of the brain that’s in charge at the moment. For example, a coaching client who unexpectedly needed to replace a washer and dryer felt more comfortable financing the purchase than using her very healthy emergency fund. In this case, paying outright felt impulsive, and she found security in paying with a credit card even though it meant dishing out more money.

● We overspend. We can incorrectly assume holding back in one area automatically frees up room to spend elsewhere, which can lead to splurging above our means. The Harris Poll survey showed that 30% of consumers bought luxury items they couldn’t afford.

“If splurging in certain areas leads to overspending or neglecting essential expenses such as bills, debt payments or savings contributions, it can result in financial instability,” says Myah Moore Irick, a Merrill advisor and founder of the Irick Group.

● We prioritize instant gratification. You get a dopamine hit when you purchase something you want, whether it's a luxury sweater or a trip to Bali, says financial therapist Shaywanna Harris-Pierre, Ph.D. Chasing after that sensation can lead to habitual impulse spending and buying things that provide temporary comfort and perceived safety rather than long-term financial self-care, she says.

How to keep split-brain budgeting from ruining your finances

Here are some ways to make sure split-brain budgeting doesn’t wreak havoc on your money decisions.

● Slow down. Making purchases and other financial decisions in a hurry can often end badly. So, when possible, put time and space between feeling the urge to spend and following through. This will allow emotions to subside and give time for your logical thinking to kick in.

This can look like letting your online shopping cart sit overnight or creating a rule with your spouse that you’ll discuss any unplanned spending above a specific dollar amount.

● Count the cost. Whether you’re splurging or being frugal, literally do the math to see if your choice makes sense.

My partner likes to push down the trash in our kitchen garbage can so he can fit in as much as possible before taking it out. His reasoning? It saves us money on trash bags. I point out that they probably cost us $.10 each, and I’m more than willing to “waste” that much money to avoid an overflowing trash can. Sometimes, a choice makes sense on a vague, general level, but putting it into dollars and cents may tell a different story.

● Level up your self-care. We're more likely to make poor or irrational decisions when we’re fatigued, stressed or experiencing other negative emotions. So, we can set ourselves up for healthy decision-making by taking care of our bodies and prioritizing self-care. Tackle the basics like getting enough sleep, exercising and eating well, but also make sure pleasure and rewards are a part of your everyday experience.

Winding down daily with a fancy cup of tea and a 10-minute journaling session, weekly manicures or monthly massages are all ways to fill your tank and can prevent unhealthy stress responses like loading up your Amazon cart after a stressful day.

● Revisit your goals. “Focusing on short-term splurges at the expense of long-term financial planning and investment opportunities can hinder financial growth and wealth accumulation,” says Irick. “This is why having a financial plan is so important. You can see how splurging over time impacts your long-term financial goals.”

Leverage the power of split-brain budgeting.

When we’re willing to make conscious tradeoffs and leverage both the thinking and feeling parts of our brain, split-brain budgeting can be a superpower — especially when it leads to spending according to our values.

“Split-brain budgeting can be a very healthy way of achieving our goals,” says Irick. “It shows a deep knowledge of one’s incoming and outgoing money and shows self-awareness.”

Harris-Pierre agrees. “[Split-brain budgeting] can help us be more mindful of our money beliefs and values so that our spending decisions align with our money goals and financial health.”

If you intentionally tighten up some monthly recurring expenses so you can afford to go on an annual multigenerational vacation, buy a piece of art that lifts your soul every time you see it or boost your retirement savings, that’s the power of split-brain budgeting at work, sis.

“Splurging on experiences or purchases that hold significance or bring us happiness can enhance our overall satisfaction and enjoyment of life,” says Irick. “Split-brain budgeting is successful when the goals are clear, and a plan is in place to meet those goals.”

What is your favorite way to save money? What splurge is totally worth it? Share your ideas in the comments below.

Alaya Linton is a personal financial coach on a mission to help women break the paycheck-to-paycheck cycle and create a better financial future. As a former clothing designer, she writes about both money and fashion and has appeared in U.S. News & World Report, thebalance.com, GOBankingRates, and other publications.