So far we have talked about tracking your spending, and setting up your budget. In this last installment of my Budgeting 101 series I want to touch on some of the problems people encounter with budgeting. Your budget is a fluid thing and requires periodic updating, no less than once a month you should be sitting down with your spouse or significant other and realigning your budget with the upcoming months requirements. I even know of some people who set weekly budgets to allow for more fluidity in their spending throughout the month. Your spending is going to change from month to month, so should your budget.
Tracking your spending gives you a general idea of where your money went but won’t always predict where it will go in the future. You may not always have the same items in your budget, you may need to add a budget item for a gift for upcoming birthdays or medical procedures. The key is to constantly be reassessing your needs and wants and adequately budgeting both. Include your savings and debt payments and as your priorities change alter your budgets accordingly.
If you don’t adequately account for your projected spending and realize emergencies happen, you are going to fail to maintain your budget. Once you start to fail to meet your budget goals you will want to stop budgeting. Don’t stop budgeting just budget better, learn from your mistakes and do what works for you, eventually you will become a master of your budget, and your finances.
There are so many reason budget can fail to work effectively. Usually they are related to the budget setters not being committed to the budget, just like a diet you have to commit to it, not just go through the motions.
Don’t just take my word for it though, here are several reasons why budgets fail, submitted by the twitter faithful, if you didnt’ get a chance to be included you may not be following me.
@JeremyVoh: Budgets fail like diets fail. People try to make a sudden drastic a change to their lifestyle. Old habits prevail.
@ManVsDebt: People make them too complex. The more simple your budget is the higher probability of you adapting the process as a habit!
@Matt_SF: Budgets fail b/c of frustration. Most people hate to lose, so if they fail once or twice, they simply give up.
@MyLifeROI: Unrealistic goals/expectations
@The_Weakonomist:unplanned expenses have to be the #1 reason.
@llamamoney: Budgets as no fun. If I have to follow a budget, I can’t have what I want right now.
@MoneyManagement: They fail if they are made with unrealistic expectations (same goes for diets!)
@stephonee: Budgets are usually short-sighted and about deprivation. Goal-setting needs to come before budgeting
@gabbysauce: I think individuals have a hard time distinguishing between need and want
@moolanomy: People are trying to change too fast. It takes time to warm up to new habits.
@MattJabs: Budgets fail because people set unrealistic goals and become discouraged
@TheHappyRock: Failure to plan for ‘unexpected’ or non monthly expenses.
If I were to take only two tips from this list it would be 1.) budgets are like diets, and 2.) don’t make your budget too complex. Remember everyone cheats on their diet every once in a while just don’t go on a binge. And I have no idea why I chose the picture it just struck me as pretty neat.