As you already know, budgeting is a key skill that can help you keep your finances on track in both the short and long-term. However, even if you take the time to craft a budget for your household, you might find that you have trouble hitting the mark each month.
There can be a variety of reasons for coming up short on your budget, and you will need to figure out exactly what is going wrong if you are going to resolve the problem. Below is a list of five potential reasons your budget fails?every month.
Overly Optimistic
More than anything, a budget needs to be realistic. If you aren’t realistic with the budgetary expectations that you set each month, you are inevitably going to fall short.
It might be tempting to think, for example, that you can cut back on your food costs by 20% in the months ahead. However, is that really possible, or are you just setting yourself up for failure?
Be realistic with what is possible and chart a course that you will actually be able to stick with over time.
Losing Track of the Little Things
In the world of budgeting, the little things can add up in a big way, causing you to overspend your budget. What counts as a little thing? For the purposes of this example, let’s count anything under $5 as being a ‘little thing’.
That means snacks that you might buy during your break at work, or the coffee you pick up in the morning rather than making your own cup. None of these expenses seems very important at the time, but they can be crippling to your budget when all added up.
Procrastination
Even if you have already taken the time to think out your budget, it can still be tempting to put off the actual execution of the budget until ‘next month’. Of course, next month never comes and you keep doing the same things over and over again. This can be a difficult cycle to break, but you must find a way if you are going to finally make progress in your financial life.
One Big Mistake
Some people see their budget undone by a series of small purchases throughout the month, while others tend to make just one big mistake which sets them back. If you have a habit of spending a significant amount of money on one big purchase each month, try setting a spending limit for yourself with regard to single items.
For example, if you are thinking about buying anything over $100, you have to stop and think about it for an extra day before making the purchase. By giving yourself a 24-hour period to think about the expense, you may realize that you don’t need to buy that item after all.
You Don’t Have a Budget in the First Place
Of course, your budget can’t work if you don’t have one in the first place. If you don’t bother to take the time to construct a realistic, reasonable budget for yourself and your family, you will have no way to know how much you can spend on a monthly basis. Building a budget actually doesn’t take very much time at all, and yet it can be one of the best things you ever do for your financial life.
Does your budget fail often? Have you noticed any of these things causing your budget fails?
Photo courtesy of: RyanMcGuire
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I used to set my budget and lose track of what I was spending and then give up. I would just repeat the cycle until recently. Now that I actually track my spending, budgeting has gone a lot smoother .
Ha! That last reason is the #1 reason we see! 🙂
I’d say another reason many budgets fail is that people try to be too strict with them. Yes, a main purpose of a budget is to help control spending, but it should be the overall spending that matters, not always specific categories. If someone wants to go to the movies but doesn’t have budget left, take it from the dining-out category or some other area. Having some flexibility in the budget will make it a lot easier to deal with.
Before, the reason why my budget scheme failed is because of small details. Now, that it covers them as much as possible up until to the smallest amount of money, I can get accurate results of my budget.
I’ve been guilty of those. The $5 lunch here, coffees there. They add up and unless I write it down at the time of purchase I’ll tend to forget. But to point #1, it has to be realistic. If you are too optimistic and set your budget through rose colored glasses, then you are going to be disappointed really fast and will be less likely to follow through.
Thanks for the read!!
Bert, One of the Dividend Diplomats