In the past, every time I attempted to create a budget, I began with a pad of paper.
Unfortunately, by the time I had finished attempting to calculate my budget, the piece of paper resembled a hard-core tic-tac-toe tournament.
Why? Because I DETEST budgeting, and even though I’m terrible at tic-tac-toe, it’s far more entertaining than budgeting.
As much as I detest it, I acknowledge its need if you wish to take responsibility for your financial life.
This is where I was fortunate. VERY fortunate.
My incredible wife is our household’s Queen B, where “B” stands for “budgeting.” She enjoys budgeting and does it like a rock star.
Because of her, our budget is not terrible.
There are reasons why your budget stinks, and unless you fix them, it will never help you achieve your financial objectives.
Here are fifteen reasons why your budget stinks and how to improve it.
Your budget does not correspond with your personality.
To be effective, a budget must work for your personality and lifestyle, as well as those of your family. Creating a budget and mandating that every member of your home stick to it will not provide the desired result.
For instance, if you have a more relaxed attitude about money, restricting yourself all funds for discretionary expenditure might destroy your budget. You may need to agree that a modest portion of the budget must be allocated for discretionary spending.
This does not imply that you may spend at your discretion. This is a budget, after all, and the purpose is to change your spending patterns, not to give you carte blanche to blow all of your savings. However, if you are aware that you will not be able to adhere to a highly rigorous budget, build in some financial flexibility and position yourself for success.
You must base at least a portion of your budget on personal preferences, including those of yourself, your spouse, and your children.
You’re a yo-yo budgeter.
You may be familiar with the term yo-yo dieter.
This individual has a lengthy history of on-again, off-again diets (I’m the ideal example since I swing from rigorous paleo one week to devouring six doughnuts the next). Although they want to reduce weight, they lack the willpower and discipline to adhere to any diet for an extended period of time.
This is made even worse by the fact that yo-yo dieting might result in the dieter gaining more weight than they lose over time.
The same may be said of you in terms of financial planning. You have a strong desire to gain financial control, but you lack the discipline and/or commitment to create a budget and adhere to it for more than a few months or even weeks. And, similar to a person on a yo-yo diet, a yo-yo budget might put you in a worse financial position than when you began.
For a budget to be effective, it must result in permanent changes to the way you handle your finances.
After a year or two, you may be able to loosen your budget, but when you first begin, you’ll have to be quite rigorous, similar to a Budget Boot Camp, which will drive you to make significant lifestyle adjustments. However, even after completing Boot Camp, you must continue to adhere to the fundamentals of your budget for the foreseeable future. No backsliding permitted!
Your budget lacks flexibility.
Since spending tends to fall from month to month, your budget will not be effective if it lacks a certain amount of flexibility. This will necessitate that when you have a surplus in your budget, you save it for months when your expenses are higher than average.
You may anticipate a certain amount of variance in your budget from one month to the next, which is why you must have a plan to smooth out any fluctuations. Some months have more costs than others, and they appear out of nowhere.
Other months, you may really fall off the wagon, spending more than you should, which puts you in a bit of a financial hole. As long as it doesn’t happen too frequently, and as long as your budget has the flexibility to accommodate it, you should be good.
Ensure that you are not continuously dependent on the flexibility of your budget to sustain these wasteful spending practices.
You watch too much television.
This may surprise you, yet it is a significant reason why budgets don’t work. If you spend a significant amount of time watching television (with the exception of St. Louis Cardinals baseball, Shark Tank, and The Walking Dead), at least four things come into play, and they all work against you:
Your television is enticing you to purchase and engage in activities that you do not need and cannot afford. It is known as an advertisement.
You’re zoning out and losing concentration, and if there are one thing budgeting demands, it’s concentration.
The time you spend in front of the television reduces the amount of time you have to design less expensive spending alternatives. Without a doubt, frugality involves more time and work on your behalf.
If you want to generate more money, watching TV will save you a lot of time.
If no one has told you this before, you now know that having a budget demands you to watch far less time.
Your budget assigns insufficient money of funds to certain costs and an excessive amount to others.
Any budget you establish must have a system of balance. If you spend excessively on some things and insufficiently on others, the imbalances may eventually lead you to forsake your budget totally.
One such example is allocating excessive funds to pay off credit card debt. Certainly, credit cards are irritating, and you wish to get rid of them immediately. However, this is typically a lengthy procedure that requires your budget to be in top form.
You may be damaging your budget if you devote excessive money of funds to credit card debt money and pay no contributions to savings or if you spend too little on food.
Yes, you can survive without a balance for a few months, but if it takes you more than two years to pay off your credit cards, you will likely abandon your budget long before then.
You maintain a balanced budget by borrowing to offset shortages.
In some circumstances, a budget might become mostly illusory. The most prevalent instance is when credit cards are used to offset budget shortages.
This is particularly dangerous if you have a history of excessive credit card usage. You utilize credit to cover the shortfall, promising yourself that this will be the last time you do so – at least until next time.
If you must utilize credit to balance your budget, you are essentially taking two steps forward and three steps back. This is destined for failure.
Unfortunately, my father and I had to experience this firsthand. Each month, he struggled to pay his obligations, and the only way he could make ends meet was to borrow from one credit card to pay the minimum on another. It was an endless circle that he was unable to escape.
You have not budgeted for unforeseen circumstances.
It would be lovely if all of our monthly spendings could be contained inside a clean and predictable sum, but this is fiction.
While it is relatively simple to create a budget based on fixed monthly expenses, such as your mortgage payment and debt payments, you must still account for unforeseen circumstances.
For example, if you are driving two automobiles and both are over five years old, you should establish a monthly budget for car repairs, even and especially in the months where none are necessary. In this way, you’ll be able to pay it within your budget if an emergency should occur.
You have one or two “off-budget” categories.
You may have one or more spending categories that are not accounted for in your budget, i.e., they are being ignored.
It might be a cigarette habit, a monthly bar tab, or an In-N-Out Burger obsession. Whatever it is, it is causing money to leave your house, which therefore leads your monthly budget to fall short.
A budget must also be thorough in order to be effective. If you exclude some spending categories from your budget, for whatever reason, you have no budget at all. If it’s something you can’t or don’t want to live without, simply add it to the budget and start saving.
Not enough money is being set aside for savings.
The objective of adhering to a budget is to generate the type of long-term development that will eventually lead to financial independence.
And you must regularly monitor your progress; otherwise, living on a budget is like being on a diet for life.
Creating a growing savings account, which you will ultimately invest, is the most tangible sign of financial advancement. Even if the primary objective of your budget is to pay off debt, you must allocate at least a portion of your budgeting to savings.
In addition to allowing you to see quantifiable progress, your savings will build a cushion that will make you less dependent on credit in the future. This will assist you in eliminating credit issues for the remainder of your life.
You have not budgeted enough money to “blow off steam.”
Regardless of the money behind your decision to build a budget, you will need to dedicate at least some reasons for entertainment.
Because life is difficult, this is required. Sometimes spending small money on enjoyable activities might prevent you from fully abandoning your budget.
Obviously, you don’t want to go overboard, but you’ll need a little extra money to pay for the odd movie, supper out, or trip to the beach. This may be the perfect distraction to prevent you from leaving your budget permanently.
You have too many expensive hobbies or too much money for “letting off steam.”
Perhaps you have the exact opposite problem: you waste too much time and money on frivolous activities. Frequently, this consists of pastimes that you do not consider to be costly. Regardless of how you choose to perceive it, though, any activity that leads you to regularly spend money is a cost.
You might be eating out too frequently, purchasing too much computer equipment, spending too much time on the golf course, or renting too many movies from Redbox (those late fees add up!).
You will need to keep track of these costs, regardless of how casually they occur, and comprehend the complete influence they have on your budget. In fact, if you don’t eliminate them entirely, these areas are simple locations to trim your budget.
You are prone to distractions.
Because living without a budget is simple, it is the default option for most individuals. Once you establish a budget, you must pay close attention to your expenditures.
This will involve some work on your side and a great deal of concentration. You must acquire a Scrooge-like mentality, at least until saving money becomes automatic and you no longer have to think about it.
You are rebelling unconsciously against your budget
Even if you are a certified free spirit, life is often enhanced by the amount of some structure. However, if you have trouble with structure, sticking to a budget may be very challenging.
People who dislike structure try to oppose any indication of it. A budget is fundamentally a framework for your finances. If you are the anti-structure type, you may deliberately or unconsciously do all in your power to ensure that the budget fails. This will allow you to return to your free-spending habits while assuring yourself that you at least tried.
Don’t kid yourself.
Almost every effort requires a substantial amount of psychology. If you do not fully comprehend your mental state, it may be tough to see why your strategy will never work. You may need to conduct some real soul-searching to establish whether or not you are actually rebelling against your own budget.
Your fundamental cost of living exceeds your income.
If you earn less than you spend, developing a budget and attempting to adhere to it is a complete waste of time. You have a more underlying problem that must be addressed first.
If your expenditures exceed your income, you have three options:
- Cut your costs
- Boost your earnings
- Use a mix of the two.
Once your income and spending are in balance, you will be ready to create a budget.
There is a significant role in your finances.
Occasionally, a significant item in your budget causes your spending to surpass your income.
Typically, it’s a large mortgage, a crazily high vehicle payment (or two), or an expensive valued item such as a vacation home. Whatever it is, it is a cost that is too substantial for you to account for in your budget.
If this type of spending is mostly responsible for your financial imbalance, you will have to make difficult finances. You may be forced to sell your ideal house and relocate into an apartment, at least until you stabilize your finances. You may be forced to sell your late-model automobiles and get a beater instead. Or you may be forced to sell your second house.