If you are in to budgeting, you must have realized by now that creating budget is the easiest thing to do. The most difficult and tough task is to stick to it. Earlier I spoke about How to Stick to Your Budget Consistently. This is another article which will try to convey the same message, a little tweaking in your habit and thoughts can make wonders.
Have you ever set a personal budget for yourself? Are you still sticking to it? My guess is that you answered these questions in a sequence of “yes” to the first, and “no” to the second. We all have great intentions of spending our money wisely in accordance with our plan, but it hardly ever happens that way.
At the end of the month (if we make it that long), we realize that we aren’t able to follow our budget at all and we just decide to throw in the towel.
Budgeting doesn’t have to be like this though, and it doesn’t have to be a chore either. It can be both fun and can be fairly simple at the same time. In order to get you through this process and follow your budget a little better this time, let’s take a look at why personal budgets often fail.
1) You Cut Out The Fun – Often times, when people make a budget for themselves, they just put all of their known bills in there and set up an amount for the “food” category, but when it comes to having fun, this is left out of the budget entirely!
Sure, you might be tight on money, but you should still do your best to budget in some fun. Without any release from the daily grind, you’re going to make yourself nuts, and you’re ultimately setting yourself up for failure.
(Related – How to Control Your Spending Without Creating a Budget?)
2) You Forgot About the “Unexpected” and Non-recurring” Expenses – There are plenty of bills that hit your account each month. These are the ones that are easy to predict, but then there are bills that only happen once every few months, or every year.
Things like car insurance, registration, oil changes – these don’t pop up each month, but you should still put them into your monthly budget because you should be saving up for these expenses.
Then, there are items like your roof. It most likely doesn’t need repair for another 3 or 4 years, but when that $5,000 expense comes your way, you’re going to wish that you’d been saving up for it all along.
(Related – Ten Budgeting Tips for Securing Your Financial Future)
3) You Have High Expectations – It takes a while to create that budget, and when you’re done you think that there couldn’t possibly be an expense that you missed and your numbers on each category are perfect. Then that first month comes and goes and you overspent your budget by $400!
You didn’t spend on anything lavishly, so how could this have happened? Well, you most likely forgot a bill, or maybe you severely underestimated that grocery bill. The point is, you will not be able to create a perfect budget the first time. For the first six months, it will just be a work in progress, and that’s ok!
4) Probably you’re using wrong tools – Are you really comfortable with the tools you are using to manage your budget? Is your budget easily accessible? When you need it, how much effort you put to understand the current pattern and deviation?
A tool is only as good as you are aware of how to use it. If you are using a professional budgeting software, are you enough conversant with it? On the contrary, if you are used to traditional pen and paper technique, are you keeping track of all earning and all spending, is the job tedious? Have you got bored sometimes?
Not using a tool properly or not knowing about the tool are one of the biggest reasons of budget failure.
(Related – Modern Home Bookkeeping with Less Effort and No Cost)
If you can get over these hurdles, you’ll be much closer to making that budget that works for you and that you’ll be able to stick with. And, once you’ve got your master budget, life just gets that much easier. Best of luck to you!
Remember, when lawmakers and economists make a mess of their budget, countries become bankrupt. US is under serious debt because of not meeting to the budget. When an individual fails meeting budget, the implication is felt much faster.
Don’t let yourself in to debt by failing in your budget goals. Take action today!
Readers, what other reasons you think personal budgets fail at times?
Thomas | Your Daily Finance says
It has happen to me but in another way I didn’t cut out enough of the fun stuff and ended up falling into I can do this or that because its not that expensive. Well 20$ here and there adds up. You have to be disciplined to make the budget work. One thing I say it Im in debt what did I spend the money on. When I realize that those so called fun things is why I am in debt its easy to stay focused.
Eric J. Nisall - DollarVersity says
My non-psychological-expert opinion is that most people fail because they want to. Or, to put it another way, they don’t want to commit the energy necessary to making the necessary changes to their lifestyle. For one thing, change is hard for many people to accept. For another, lots of people are scared to actually see the bottom lines of where their money is being spent. Also, they have the wrong idea of budgeting and saving because of people who they read on the internet who proclaim that being “financially responsible” means accounting for and saving every single penny and micromanaging to that degree is just tedious.
Little House says
It’s those darned unexpected and recurring expenses that get my budget all screwy. I do pretty well staying within everything else; food, gas, utilities, but an unexpected vet bill or auto repair mess me up.
[email protected] says
For me, #3 is what can get to me. I have high numbers that I am looking for in my savings. If I don’t get there, I look through the expenses pretty thoroughly. In general, there is not a lot of waste that I can find, so it drives me a bit nuts.
I also get paranoid of analysis paralysis if I don’t find a solution early.
My Multiple Incomes says
Having high expectations does it for me. Whenever I create my budget for the month, I already have a ball park figure of how much I will be able to save, however even before the month ends, I notice that I’m “borrowing” small amounts to fill into some aspects of my budget which I overspent on, so I realized that the best way to go about it is to be as realistic as I can be and make small allowances instead of taking all the fun out of spending.
Midlife Finance says
I’m not very good with budget. It’s just too much work to deal with.
For discretionary expense, we use a cash allowance system and that works very well for us.
Other expenses are mostly unavoidable or we talk about it before spending.
I think you have look at why you have a budget. A budget is supposed to help you reach a financial goal. If yo prepare your budget reasonably, you have a better chance of succeeding.
Jenny @ Frugal Guru Guide says
I think most people don’t put in enough flexibility to deal with the unexpected, too.
Ron @RunningFromDebt says
I feel like you never can have the perfect budget, not for me at least. I seem to be constantly working out our household budget for the last 2 years. There is always something that comes up to throw the budget in the grinder. I think I have to minimize our bank accounts because money gets pulled from everywhere and it just slips through the cracks.
[email protected] says
Any tips for automating a personal budget? It seems that the more you automate, the less room there is for error.
Tushar @ Everything Finance says
I think budgets also fail if you don’t track your spending. At the end of the day, budgeting is great but it doesn’t help unless you know how effective your budget is! I think budgeting for fun is really important, too.
KC @ genxfinance says
I agree with Jenny. Being flexible is needed to face any unforeseen circumstances. Adapt and change or else, you’ll break.
Anton Ivanov says
All very excellent tips. Being realistic with your spending habits is very important – you don’t want to put yourself in a position where you’re just going to overspend your budget because the one you made wasn’t that great. When helping others, I found it best to throttle spending over time instead of cutting it all out all at once.
They fail cuz of an unrealistic budget and not sticking to your financial plan. People become too optimistic when it comes to money which fails them.
Mark Ross @ ThinkRichBeFree says
I think that most budgets fail due to unexpected expenses, so I totally agree with you. Sometimes, having too much expectation can really bring things down too. Great post by the way, thanks for sharing this!
David @ PBC says
Personal budgets fail because there is no willpower on the part of the person concerned. Keeping track of all your spending can be very tiresome so this is one area that we have to be good at. We also need to be flexible or else we will be hard-pressed to succeed.
As I replied at lifehacker:
I was never able to do a successful budget for basically two reasons:
– It is was hard to reconcile my 2 credit cards, my wife account, my account, my saving account and travel loan.
– It was a pain in the *** use apps like Quicken or Microsoft Money or Iphone Apps, they were or too complicated ( multiple statics I do not need, just to input a snack purchase ) or too simple ( I bought a new TV, split in 12 payments, 12 inputs in Iphone )
So after 2 years using poor solutions I tried YNAB, it is simple as I need. Focused in peace of mind, so the input is on the fly, the reconcile as easy as it can be.
About the points in the article.
Cut out the Fun – Set a account just for fun and divide it by weeks. It is cool when I do not spend week 01 fun and has the double to spend on week 02.
Overspending – YNAB has a course to help you deal with it. It is fantastic, and when I overspent in a category, i just take from another one, and VOILÁ it is green again.
Usually I talk to my wife:” We overspent in X lets take some from Y? ” It is really REALLY good to have this kind of peace and conversation.
Once Again folks, if anyone is planning to buy YNAB use this link to save $6
And give it a look, it will change your life:
For most people it isn’t a failure in their budget, it’s a failure in their mindset.
– fail to pay yourself first
– fail to resist the urge to splurge on some shiny new flimfloozler
– fail to be realistic about what you can afford
– fail to think for yourself and avoid the Keep Up With The Jones’ mentality
Personally, I use accounts as “envelopes” and if there’s no money in the envelope, it doesn’t get bought. With one of those envelopes being investing, I’m always paying myself first and will eventually get out of the rat race.
Fitness Meals Toronto says
I’m not very good with the budget, but your post is very good.Thank you for posting a unique article, This above post is good and is very informative.
what did you learn to do differently to make your budget work?