If you’ve ever started a budget, you’ve most likely started with good intentions.
Sometimes your budget gets the job done, but other times, it’s a serious crash and burn that can leave you in worse shape than when you started.
Every time I’ve tried to budget in the past, I would always start with a pad and paper.
Unfortunately, by the time I got done trying to do my budget the sheet a paper looked more like a hardcore tournament of tic-tac-toe just took place.
Why? Because I HATE budgeting and even though I suck at tic-tac-toe it’s a whole lot more fun than budgeting.
As much as I hate it, I recognize that it’s a must if you have any hope of taking charge of your financial life.
That’s where I got lucky. VERY lucky.
My amazing wife is the Queen B. in our household with “B.” standing for “budgeting”. She loves to budget and she does so like a rockstar.
Because of her our budget doesn’t suck.
There are reasons that your budget sucks, and until you get that worked out, it’ll never help you reach your financial goals.
Here are 16 reasons that your budget sucks, and how you can fix it.
1. Your Budget Doesn’t Match Your Personality
In order for a budget to work, it has to fit your personality and lifestyle, and not just yours, but also your family’s. Setting up a budget and simply requiring yourself and every member of your household to adhere to it won’t make it happen.
For example, if you have a more casual attitude about money, completely denying yourself any cash for free-spending purposes could doom your budget. You may have to accept that at least a small percentage of the budget will have to allow for discretionary spending.
This doesn’t mean that you can spend whatever you want. This is a budget, after all, and the goal is to reform your spending habits, not give you a license to mow through every cent you’ve saved. However, if you know that you will be unable to stick to something that is very rigid, build a little bit of financial flexibility into the budget, and set yourself up for success.
Without going too far with it, you have to at least partially construct your budget around preferences – yours, your spouse’s, and even your children’s.
2. You’re a Yo-Yo Budgeter
Perhaps you’ve heard of the term yo-yo dieter.
That’s a person who has a long history of on-again, off-again dieting (I’m the perfect example of this since I go from being strict paleo one week to chowing down six doughnuts the next week.) Though they have a desire to lose weight, they lack the will or the discipline to stick to any diet for any length of time. What makes this even worse is the fact that yo-yo dieting can actually cause the dieter to gain more weight than they lose over the long-term.
The same could be true of you when it comes to budgeting your money. You have a strong desire to get control of your finances, but you lack the discipline and/or the commitment to implement a budget and stick with it for more than a few months, or even a few weeks. And, much like a yo-yo dieter, a yo-yo budget can leave you in worse financial shape than when you started.
Here’s the deal: in order for a budget to work, it has to create permanent changes in the way you manage your finances.
Though you may be able to lighten your budget after a year or so, when you first begin you’ll have to be very strict – something like a Budget Boot Camp - that will force you to make radical changes in your life. But even if you get past the Boot Camp phase, you still have to retain the basic elements of your budget for the foreseeable future. No backsliding is allowed!
3. Your Budget Isn’t Flexible
Since expenses tend to rise and fall from one month to the next, your budget will not work if there isn’t a certain amount of flexibility built into it. That will mean that during the months when there is a surplus in your budget, you’ll have to bank it and have it available to shore up the months when your expenses are higher than normal.
You can count on there being a certain amount of inconsistency in your budget from one month to the next, which is why you absolutely must have a plan to even out those ups and downs. Some months simply have more expenses than others, and they seem to come out of nowhere.
In other months you can actually fall off the wagon – you spend more than you should, and it puts you in a bit of a hole. That’s actually normal, and as long as it doesn’t happen too often, and as long as your budget has enough flexibility to work around it, you’ll be fine.
Just make sure you aren’t constantly relying on the flexibility of your budget to continue those bad spending habits.
4. You’re Watching Too Much TV
This one might come as a surprise to you, but it is a major reason why budgets don’t work. If you spend a lot of time watching TV (I’ll allow some exceptions like St. Louis Cardinals baseball, Shark Tank, and The Walking Dead), at least four factors come into play, and all work against you:
- Your TV is convincing you to buy things and do things that you don’t need to, and cannot afford. It’s called advertising.
- You’re zoning out and losing focus – and if there’s one thing that budgeting requires, it’s focus.
- The time you spend in front of your TV limits the amount of time that you have available to create lower-cost spending alternatives. Make no mistake about it, thrift requires more time and effort on your part.
- If you need to earn more money, TV will so cut down on the time you’ll need to make it happen.
So if no one has told you this up until this point, you now know – having a budget requires that you spend a lot less time watching TV.
5. Your Budget Allocates Too Much Money for Some Expenses and Not Enough For Others
Any budget that you create has to have balance built within it. If you’re spending too much on certain expenses, and not enough on others, the imbalances can eventually cause you to abandon the budget entirely.
One common example is where too much money is being allocated to pay off credit card debt. Sure, credit cards are annoying and you want to get rid of them as soon as possible. But it’s usually a long-term process that will require that your budget is firing on all cylinders.
If you are allocating too much money to pay off credit card debt, and not putting any money into savings, or spending too little on groceries, you could be sabotaging your budget.
Yes, you can get along without balance for a few months, but if it takes a couple of years or more to pay off your credit cards, it’s more than likely that you will abandon your budget long before that happens.
6. You’re Staying Within Your Budget – By Borrowing to Cover Shortfalls
There are certain situations where a budget can become mostly an illusion. The most common example is where you are covering budget shortfalls by tapping credit cards. This is especially problematic if you have a history of over-using credit cards in the first place. You use credit to cover the shortage, telling yourself that you’ll just do it this one last time – at least until next time comes.
If you have to use credit to cover your budget, you’re taking two steps forward to only take three steps back. This can only end in failure.
I, unfortunately, had to witness this first hand with my father. He struggled each month to pay his bills and the only way he make ends meet was to borrow from one card to make the minimum payment on another. It was a vicious cycle that he was never able to break.
7. You Haven’t Budgeted for Contingencies
It’s nice to think that all of our expenses can fit within a neat and consistent amount every month, but that’s also a fantasy. While it’s fairly easy to build a budget around fixed monthly expenses, like your house payment and debt payments, you still have to make an allowance for contingencies.
For example, if you are driving two cars and both are over five years old, you should make a monthly allowance for car repairs, even and especially in the months where none are required. The idea is to have the money available when one does happen; that way, you’ll be able to pay it within your budget.
8. You’ve Got an “Off-Budget” Category – Or Two
You might have an expense category or two that you’re keeping off budget – which is to say that you’re pretending it doesn’t exist. It could be a cigarette habit, a monthly bar bill, or a heavy addiction to In-N-Out Burger. Whatever it is, it’s causing money to leave your home, which in turn causes your budget to come up short every month.
In order for a budget to be effective, it must also be comprehensive. If you’re holding certain expense categories outside of your budget – for whatever reason – you effectively have no budget. If it’s truly something you can’t – or don’t want to – live without, just add it to the budget and save accordingly.
9. Not Enough Money Is Going Into Savings
The whole purpose of being on a budget so that you can create the kind of long term improvement that will ultimately lead to financial independence. And you’ll need to see your progress on a regular basis; otherwise, living on a budget is something like being on a diet for life.
Creating a growing savings account – that you will eventually put into investments – is the most tangible evidence of financial progress. For that reason, at least some of your budget has to be earmarked for savings, even if your primary purpose in budgeting is to payoff debt.
In addition to being able to track measurable progress, your savings will provide you with a cushion that will make you less reliant on credit in the future. That will help you to eliminate credit problems for the rest of your life.
10. You Haven’t Budgeted Enough “Blow Off Steam” Money
No matter what the reasons are that are driving your decision to create a budget, you are going to have to allocate at least some money for fun. Life is stressful, and that’s why this is necessary. Sometimes spending a little bit of money on fun activities can keep you from falling off the budget wagon completely.
Obviously you don’t want to go crazy here, but you are going to have to allow some extra cash to pay for an occasional movie, a dinner out, or a day at the beach. This might be just enough diversion in your life to keep you from abandoning your budget forever.
11. You Have Too Many Costly Hobbies – Or Too Much Blow Off Steam Money
Maybe you have the exact opposite problem: you spend too much time and money blowing off steam. Often this comes in the form of hobbies that you don’t exactly think of as expenses. But any activity that causes you to spend money on a regular basis is an expense, no matter how you choose to view it.
You might be going out to eat too often, spending too much on computer equipment, spending a little too much time on the golf course, or renting a few too many movies at the Redbox (those late fees add up!). You’re going to have to track of these expenses – no matter how casually they may occur – and understand the full impact of the effect they’re having on your budget. In fact, these categories are easy places to slash your budget, if you don’t get rid of them altogether.
12. You’re Too Easily Distracted
Living without a budget is easy, and that’s why it’s the default option for most people. Once you go on a budget, you seriously need to focus on your spending. That will take a bit of work on your part, and that will require a large helping of focus. You’ll have to adopt a Scrooge-like mindset, at least until saving money becomes second nature to you and you no longer have to think about it.
13. You’re Unconsciously Rebelling Against Your Budget
Even if you are a certified free spirit, life is usually better when it includes at least some amount of structure. But some people have problems with the whole structure thing – if you’re one of them, living within a budget will be especially difficult.
People who don’t like structure tend to rebel against any sign of it. A budget is essentially structure for your finances. If you are an anti-structure type, you may consciously or unconsciously do everything that you can to ensure that the budget fails; that way, you can go back to your free-spending ways, telling yourself that you at least tried.
Don’t kid yourself.
Nearly every endeavor in life involves a heavy dose of psychology. If you don’t quite understand where your head is at, it may be impossible to realize why your plan will never work. You may have to do some serious soul-searching to determine if you’re in fact rebelling against your own budget.
14. Your Basic Cost of Living is Higher Than Your Income
If you’re spending more than you’re making, creating a budget and trying to live within it is a complete waste of time. You have a more fundamental issue that will have to be resolved first.
If your expenses are higher than your income, you have three choices:
- Cut your expenses
- Increase your income
- Use a combination of both.
Once you get your income and expenses in balance, then you’ll be ready for a budget.
15. There’s a Black Hole in Your Finances
Sometimes there is a major expense in your budget that’s causing your expenses to exceed your income. Most often, it’s an out-sized house payment, a ridiculously high car payment (or two), or an expensive prized possession, like a vacation home. Whatever it is, it is an expense that is too large for you to budget around it.
If this kind of expense is primarily responsible for the imbalance in your finances, you’re going to have to make some hard choices. You may have to sell your dream home and move into an apartment, at least until you get your finances under control. You may have to sell your late-model car(s) and buy a beater instead. Or you may need to sell your cherished second home.
It may be that your finances won’t improve until you make one of these major changes in your situation. But as always, the sooner that you act decisively, the better and faster your finances will improve.
16. The Timing Just Isn’t Right
This is a factor that is completely beyond your control. As much as you may want to create a budget in your life, it may be close to impossible to implement if you just had a baby, or if you are going through a health related catastrophe, or a serious legal entanglement.
Sometimes your situation can be so severe that your only option is to tread water, minimize the damage, and wait it out. If that’s your situation, focus your efforts on minimizing the damage. That will help you to start a budget when the time finally is right.
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