Budgets are great… if they work. There are many reasons why your budget may be failing. Below is a list of 12 reasons to look at when asking yourself “why my budget is failing” and some solutions to help you out.
I’m gonna let you in on a secret… it took us about 3 years before we finally figured out how to work a “budget” with our financial situation. It took time, patience and persistence. We are glad we stuck with it, because having a budget has paid off in many many circumstances.
Why your Budget is Failing… and how to fix it.
1. It’s too restrictive and unrealistic
Often we tend to set our budget really “tight”. At times you tend tell tell yourself you will only spend X amount in a category, but really, that’s pushing it. Other times, you set your budget to the exactly bring home income… then when you go over, you get behind each month. Allowing some “wiggle” room in each category, as well as your over all “expenses” will help you keep to your budget. Give yourself about $10-15 extra in each category to allow for slip ups and mistakes. When you feel you can actually “keep to your budget”, you’ll keep working at it and it can improve your finances. But when you always go over, it’s frustrating and leads down the slippery slope of either continuing to over spend (because you do it anyway), or quitting the budget all together. Both aren’t good ideas.
- Example: We estimate we only spend $100 on gas… and while that may be likely 25% of the time, realistically we actually spend $120. So, we increased the budget to $130 to allow for mistakes.
2. You haven’t adjust your budget… since day one
As humans, our habits and lives change. Our budgets should change as well. Some obvious changes would be change of income, new member to the family, or increased prices of insurance. But there are also smaller changes as well. Maybe your best friend moved away, so you don’t meet up for lunch with her every week now…that’s an expense you can take out of your budget. What if you are working on your marriage and trying to go on more dates… that needs to increase in your budget. Gas prices, health insurance, school supplies, kids joining sports. All of these price changes should show in your budget as well.
- Example: You live in Nebraska, in the spring and summer the weather is beautiful to keep your windows open. Your utilities drop from $150 to $100 a month… but this also means your kids are more involved in sports. Drop your “utilities expense” to $100 and increase your “sports/children expense” up $50.
- Read more about if you should adjust your budget here.
3. Your expenses are too high.
This may fall under the category your budget is unrealistic, but it is a little different. Instead of setting your budget too low… your have expenses that are too high for what you are making. Some examples are your mortgage, rent, or car payments are more than you can handle. Or you signed your kids up for 3 sports, when really, you can only afford 1.
Many times our society pushes us to this budget problem.
Theoretically, your “housing” (mortgage or rent) should be NO MORE than 1/3 of your income. As I have talked to people, I notice it is more than half of their income! This doesn’t even include the newer car they bought. This leads us to the next reason when asked “why my budget is failing”.
4. You aren’t telling yourself “no”…You spend money you feel you “deserve”… OR pride gets in your way.
There is no easy way to tell you this, but you do have to say “no” sometimes, turn down items you feel you “deserve” (like those weekly manicures or daily coffee stops), and even swallow your pride and tell you best friend, “No, I won’t be putting my kid in soccer this year. We just can’t afford it. Maybe next year.”
Let me tell you a secret, your friends won’t be mad at you, or make fun of you. They will respect you for sticking to your budget. I know this, because I have had to say this over and over. Having many friends with 1 or 2 kids, compared to my family with 4 kids, we can’t afford the “luxuries” of other families. But you know what, your friends will still stick around. And you may even be helping them “stick to their budget” better by hearing you swallow your pride.
5. You are financially immature.
Are you learning from your finances mistakes? Did you just buy a new car, when deep down, you know you should have gone with the older used one. Are you putting money into savings and preparing for a rainy day? Are you letting pride and society get in the way and not accepting who you are and what are YOUR bests interests?
I see friends and family, time and time again, make the same financial mistakes. Whether it’s because they choose not to learn, or let pride get in the way, it doesn’t matter. It’s hurting them AND their family. We are all adults here, it’s time to start acting like one.
6. Family isn’t on board
Whether it’s your spouse not “sticking” to his part of the budget, or the kids constantly nagging you for things they want. If your family isn’t on board, it’s going to ruin your budget. I recommend talking to them about money. If they are young, tell them, “no we can’t afford that, but when you save up enough money you can buy it”. Teach your teenagers how to wisely spend money. Openly talk about money in your household.
7. Money isn’t being tracked… in your bank accounts or credit cards.
Find an app, or use pen and paper. Tracking your money each day… or at least once a week… is important. Seeing where your money is going, and writing it down will help you realize what you are spending, and how often. If you write down in your budget your 5 coffee trips for the week… you’ll start to realize how much you are actually spending on coffee. I’m not a fan of “cash only”, but if you do that, great! Whether you are cash only, or use credit cards or not… you need to be tracking every penny.
“Really… every penny?”- says my husband, “You’re a penny hoarder”. Yes… I am. Because I would rather use those extra pennies to go on a great vacation with my family or pay off debt.
8. You budgeted in bills, but forgot the other expenses.
Budgets just aren’t for bills only. You need to calculate all of your other expenses. Such as food, gas, school needs, hygiene needs, savings for medical and schooling, life insurance, gifts, Christmas, vacation. Everything you spend money on, any time in the year needs to be budgeted. Be sure to calculate one time expenses into your budget too. You can read more about one time expenses here.
9. Didn’t set goals.
Setting financial goals allows you to see progress and work towards a goal. A few goal ideas are: save $2000 for Christmas next year, $5000 for Vacation in 3 years, pay off student loans by 2020. Be sure to set goals so there is a reason behind budgeting and “sticking to your budget”.
10. Forgot to plan for emergencies.
Be sure to budget some money to go into savings each month for emergencies. Also, having an emergency fund is important as well. Then, when an emergency comes, you can use your savings instead of going into debt.
11. You live in the wrong area.
Some states have a lower cost of living than others. If you find yourself continuously cutting things out of your budget, but still going over… you may want to see if it’s just where you live. There are some places where it’s hard to be frugal, where other cities have ample opportunity.
12. Not giving it enough time.
This is another HUGE mistake. Most people set a budget thinking they are going to be saving all kids of money. This isn’t true. Budgets help you to be financially free. So you can choose where to spend your money, and have money to spend for the “fun things”. Budgets take time. It takes about 3-6 months to really see how you are spending your money, and then you need to make adjustments necessary.
If your budget isn’t working, it’s probably because you haven’t given it and yourself enough time to work out the kinks.
If you are asking yourself “why my budget is failing”, it’s wise to look into a few of these reasons. Just remember #12… that it’s going to take time… and a commitment to working with it.
What is one thing you did wrong with budgeting? And how did you fix it? Comment below..
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Thanks for reading!