Creating a budget is one thing, however, sticking to it is another. These two factors will in one way or the other determine the success of your budget and financial status in the long run.

But you may wonder, after taking a long time to sit down and draft out a very comprehensive budget, why is it not working? We will let you in on some factors that might prevent your budget from giving you the desired result and how you can fix it. First, why is your budget failing?

• Why do Budgets Fail?
• How can Budget Problems be Fixed?
• What Should you do if your Budget Doesn’t Balance?
• Why do People not Keep a Budget?
• What are Some Budgeting Strategies?
• Why is Budgeting so Hard?

Why do Budgets Fail?

You are not Realistic

You look at your budget to cut expenses and not at your spending reality. We can all dream big dreams, but they are not always based in reality and this is especially true when it comes to your budget.

Read Also: The Ultimate List of Personal Finance Tips

When you’re going to look at your budget to cut expenses, you need to take into account your spending reality. Which is why it’s so crucial to track your expenses before building out your first successful budget. A successful budget is based in reality and on what you’re spending.  

Because big cuts and jumps are really tough to make when you don’t realize just how much you’ve been spending one area. You may be budgeting $200 for groceries but in reality, you’re spending $600 on groceries and eating out every month. So trying to get down to that $200 is pretty much setting yourself up to fail.

You Forget to add big Irregular Bills

Now in the previous example, we said to go back and look at your expenses in the last 2 to 3 months minimum and there is a reason that it is the minimum. You may actually want to go back further because often everyone has big irregular bills that only get paid a couple of times a year.

For example, car insurance, or renters insurance, or car registration, or membership dues.

If you’re forgetting to factor these big bills that only come up a few times a year into your budget you’re going to fail because you’re not gonna have the money set aside for them when the time comes due. Which means you’re going to be scrambling.

Priorities don’t Align With Your Budget

Another problem people face and the reason why their budgets fail is because their priorities don’t align with their budget. You may want to travel a lot, or take a class, or get better at cooking. But your budget is instead aligned toward spending money on going out to dinner or the movies or on little things that are taking away from reaching your goals.

Not Actively Budgeting

Another reason your budget might be failing is because you aren’t actively budgeting. Unfortunately, budgets and I’ll like crockpots, you can’t set them and forget them. You have to actively stay on top of them and track your expenses throughout the month to ensure you’re staying on budget.

You don’t Budget in a Safety net

Have you ever been totally on track with your budget, within your spending and everything, only to have it blow up in your face? If you have, it’s because you didn’t budget in a safety net or a buffer. Because life happens and lots of unexpected things in life happen.

Things you can’t plan for or anticipate. Which means they can’t be categorized in your budget. Which is why you need a buffer or safety net. Because not all unexpected expenses are emergencies. So you don’t go raiding your emergency fund for every little thing.

You Don’t Have an Emergency Fund

Let’s say your budget is on track and then your car breaks down, or your dog got sick, or you had a medical emergency.

It’s going to cost you more than a buffer can handle.  Which is why you need an emergency fund. They’re  essential to financial success. They keep you from going further into debt when you’re working to pay off debt and they also give you some peace of mind. But

So yes your budget should have a line item for your buffer as well as for your emergency fund now if you have a solid emergency fund you don’t necessarily need to keep adding to it unless you end up using part of it for something.

Even if you aren’t actively saving in your emergency fund, it should still be a line item in your budget that shows how much is saved, so you can add to it if necessary.

How can Budget Problems be Fixed?

The simplest way to fix a failing budget is by being realistic with where you are today and where you want to be. It might not be possible for everyone to get a side hustle, or become a millionaire. Not because it’s not possible, but because it’s not what will bring everyone happiness! 

Wherever you are on your budgeting journey, always remember to align your budget with what you value most. You will never be able to fix failing budgeting if you don’t believe in how you are spending your money. There’s no point saving for a house if your dream is to drive around America in a motor home. Budgeting is as much about the maths as it is about the perspective. 

Stop Using Credit

This is the first thing you need to do when your budget begins to fail. What you need to realize if you’re still using credit, is that just because you use credit, doesn’t mean you get to not track that spending! You still have to pay that money back! 

Big mistakes a lot of people make is just totally not tracking their credit card charges which totally messes up their budget because it’ll trick you into thinking you can cut certain budget lines further than you already did!

For example, if you charged groceries one week out of the month, you’ll end up budgeting way less for groceries the next month and you’ll struggle to make it work but you won’t understand why.

Accept your financial position 

Your budget needs to be realistic. Here are two examples of this;

• No one is going to go from spending $200 a week at the supermarket to $50 overnight. 
• You can’t have a monthly budget on $5,000 of income if you’re only earning $3,000 

Accepting your income doesn’t meet your planned budget can be frustrating. If it’s not in your control to increase your income or decrease your expenses, move towards a position of making the most of what you have.

If you haven’t already, it’s time to revisit your financial goals and make sure your spending and saving reflects this.

Review your spending every month

Whether you track every dollar you spend on a daily basis, or just do it at the end of the month you need to know how you fared. For example you might have said you will spend $30 on take away each week, but you’re really spending twice that because you haven’t included buying a coffee and lunch a few times a week at work. 

Reviewing your spending each month is like a self-report card. Did you stick to your budget, or not? If it’s the latter, revisit point one about accepting your income and current financial commitments. It doesn’t matter if you didn’t stick to your budget, but you need to find out where you went off the track. 

Have an Emergency Fund

Did you know that people who have an emergency fund are much more likely to survive… well, a financial emergency? Haha! I guess that’s kind of obvious because it’s emergency money.

Tons of regular people, just like you and me, don’t have any money ready in case of an emergency. What would you do tomorrow if your car broke down? Probably either put it on a credit card or cut your budget in half for next month and then suffer. Not an awesome way to live, right?

Having an emergency fund will fix your budget because it helps steer you away from financial disaster.

Prioritise your wants 

To fix a failing budget, you need to review your current spending against your financial goals. Revisit what we talked about in step 1 of acceptance. 

It’s easy to include frivolous expenses in your budget when there is some kind of attachment, or underlying reason to it. Some things we will never cut out (daily coffee, anyone?), others we will. What we keep and what we cut out should be aligned to your own personal values.

Prioritise what you want by using your financial goals and life values to guide where you should be spending your money. For example, If you wear corporate wear to work and continue to buy casual clothes for the weekend, ask yourself if you would rather new clothes every week or to be holidaying once a year in the tropics? To fix a failing budget, focus on prioritising your wants. 

Simplify what you can

Take advantage of technology and have as many things as possible automated for you. How to fix a failing budget could be as simple as setting up a savings account and arranging an automatic transfer to this account every week. If you have to log on to your online banking and do it, chances are you will miss a day here and there.

There’s no need to overcomplicate things either by having multiple bank accounts for different expenses. If you have to think about what card you need to use for groceries or which account pays the gas bill you might end up more confused than helped. 

How to fix a failing budget should always start with focusing on what you value most, and making it simple to manage your money. 

What Should you do if your Budget Doesn’t Balance?

1. Put Savings In A Different Account

As soon as you get paid, put a portion of it into savings. However that much is is up to you, but make it consistent and make it immediate. Once it’s there, DO NOT touch it. Unless, of course, it’s for the thing you’re saving for.

2. Put Aside Your Rent In Increments

If you get paid monthly, put away a lump sum in an account you don’t touch. If you get paid weekly or every second week, put away a portion of your rent so that at the end of the month your rent money will just be magically sitting there, and you won’t have to blow one whole pay check on it.

3. Think Of Spending In Terms Of Needs And Wants

When you’re spending money, categorize what you’re spending on as a need or a want. Food, bills, and rent are all needs. An expensive pair of occasion shoes is a want. Know the difference, and prioritize the needs. There will always be more wants, but your needs are generally consistent. Simple, see?

4. Stick To One Form Of Payment

It’s easier to track what you’re spending if you pay using one method. Either go cash/debit or credit only, and it will be simpler to track your spending. If you choose credit, make sure you only spend what you can pay back! It will become very apparent very quickly if you’re living outside your means.

5. Pay Your Bills As Soon As You Get Them

This should seem like a no-brainer but you’d be surprised what you have to spell out sometimes: pay your bills when they come! It’s much less daunting to pay the cost of one bill than to find yourself lumped with having to pay six at once. Don’t let them pile up!

6. Set Realistic Goals

When your budgeting, be real. Be honest with yourself about what you can save and what you can spend. Money doesn’t grow on trees, so always set goals that are within your means, and you’ll do just fine.

Why do People not Keep a Budget?

Instead of just reacting to money problems that suddenly pop up, a budget prepared in advance tells your money what to do and squeezes every bit of value out of each dollar. We work too hard earning a dollar to want anything else.

Yet, only 32% of families prepare one each month. Let’s take a look at many of the most common reasons they don’t budget.

They are afraid of what they’ll find

Budgeting can be scary at first. You may not want to find out the cost of your latte habit. However, sticking your head in the sand isn’t the answer. Knowledge is power. Deal with the truth and move on.

When we first started budgeting, you might be shocked to find out how much you were spending on food (both groceries and eating out). No one likes to face cold, hard facts like these, but because we did, we were able to reduce our spending in this area. And truth be told, it really didn’t change the quality of food we eat. It just made us more efficient in how we use our food dollars.

They’ve got the wrong idea  

Budgeting’s got a reputation for being too restrictive; you work hard for your money, why shouldn’t you be able to spend it as you see fit?

But it isn’t as terrible as it seems. In fact, when you stick to a budget, you’re likely to have even more money left over to do with as you please. Budgets shouldn’t be about making big restrictive changes. Rather, when you examine your finances, you see small ways to make changes that will have big effects.

For example, if you and your partner are spending a lot of money on groceries every month (who isn’t, right?), you could consider opening a joint account that is solely for food. At the beginning of each month, both of you put a fixed amount of money in the account.

That way, every time you swipe at the till, you’ll be more aware of how much you have left for that month. This will help you make better buying decisions, leaving you with more money to spend on things you actually want to spend your salary on.

It is time-consuming & boring

Unless you have a passion for spreadsheets, chances are that budgets bore you to tears. You might not want to budget because the actual act of budgeting just seems like row upon row and column upon column of money that’s no longer yours. 

There’s no way around it – budgets take up time. However, there are ways to manage this time and make it easier. Rather than spending hours updating your budget once a month, do it daily or weekly.

They think they don’t need to

In today’s economy, not many people can say that they don’t need to budget because they have enough money. Even if this is the case for you, a budget can always help you to save more.

Remember that time you were hassled outside the shopping center to donate to some obscure cause, and you agreed to a monthly debit order because you didn’t want to be bothered anymore? Even if you don’t remember that your bank account does!

When you look at your budget, you might be surprised at some of the things you’re spending money on, such as high premiums for car insurance, and you can then make the switch to a more affordable vehicle insurer to save money.

They think a budget can’t help

Most of us have heard the adage ‘the first step to recovery is admitting there’s a problem.’ Debt is a very personal issue and it can be difficult to admit, even to yourself, that you have a financial problem in the first place. Often, by the time you realise it, it can seem like there is no solution.

However, that’s simply not true. There are a variety of ways to help clear your debt, and although it’s a basic one, drawing up a comprehensive budget is the best way to start doing this.

What are Some Budgeting Strategies?

Starting a budget is much easier than it seems, especially with the variety of tools we have today. Before you set up your budget, take a look at these top 10 strategies to help you get started.

1. Track incoming and outgoings

For your budget plan, you’ll need to know how much is coming in and where your money is going out. Track your incoming and outgoing for a week or more. You can do this with a free app like ASIC’s MoneySmart, or you can do it on paper or a spreadsheet on your computer.

Keep your receipts and use your bank statements for accurate figures. Break up your outgoings into categories such as fixed expenses (rent or mortgage), utilities, leisure and entertainment, and essential groceries. Use this budget planner to inspire your categories.

2. Outline your budget

The next step is to write out your budget plan. Use the same categories for tracking your outgoings to project how much you’ll spend. Use these spending projections to guide your outgoings and spending for the coming week, fortnight, or month.

Make sure you plan for savings. Decide how much you’ll save from each pay cheque and have it automatically paid into a high-interest savings account. If you’re not saving enough to meet your goals, check your budget to see where you can cut back.

3. Set up a savings plan

Regular saving is the most powerful thing you can do to achieve your lifestyle and financial goals. Commit to saving 10, 20, 30 percent, or more of your incomings. Think of it as paying yourself. Always have a purpose for your savings, whether it’s retirement planning and extra super contributions, a new car, or a big wedding.

4. Review and update projections

Letting your budget go out of date is a common pitfall. As your situation changes, remember to review and update the projections in your budget plan. You might get a raise at work, welcome a new baby, or move to a cheaper rental.

Anything that changes your incomings and outgoings warrants adjustments in your budget plan. By keeping your budget plan up to date, you’re more likely to follow it and reach your goals.

5. Set realistic goals

Whether you’re saving for a housing deposit or that trip around the world, set realistic goals. If you’re trying to go from saving nothing to 50 percent of your pay overnight, you might find the sudden disruption to your lifestyle self-defeating. Realistic goals, on the other hand, are achievable. Each time you reach a milestone, you’ll be motivated to continue to the next.

6. Set new goals

As you achieve a new goal, remember to set new ones so you always have something to move towards. If you’ve successfully saved up for a $10,000 emergency fund, it could be a great time to work towards saving for a holiday or new car.

7. Use the 50/20/30 plan

Complexity is another common pitfall in budgeting. For some people, the idea of a budget with a long column of categories is too complicated to maintain. If this is true for you, try the 50/20/30 plan. This easy structure has you spending 50 per cent of your incomings on necessities, saving 20 percent, and using 30 percent for your lifestyle choices.

8. Try the three-category budget

Another strategy for keeping it simple is using the three-category budget. Rather than tracking every cent you spend, choose three categories you’re most likely to overspend in and track only these. If you spend too much on clothing and accessories, eating out, and alcohol, focus your effort on these areas and cut back there.

9. Empower yourself with the right tools

Sometimes people plan their budgets only to fail because they don’t have the right tools. There’s no perfect solution for everyone. Find the best tools – whether it’s an app linked to your bank accounts or an Excel spreadsheet – for you and your lifestyle.

10. Stay motivated

You’re the only person in charge of your finances, so make sure you stay on track and motivated to follow your budget. Celebrate your wins, regularly remind yourself of why you’re saving, and review your goals to bring to mind why it’s all worth it.

A budget plan is an essential tool that can help you achieve your lifestyle and wealth-building goals. It’s not always easy to keep to a budget plan, and life can throw you curveballs.

Why is Budgeting so Hard?

Budgeting can be tough, and you may feel deflated if you’re having trouble sticking to yours. Here are the most common problems people can have when budgeting, and how you can beat them.

Setting unrealistic budgets: if you budget to spend no more than £100 a month on groceries when you know you won’t be able to stick to that, you may go over every time. Not being able to stay within your planned budget could make you feel like a failure, so you’re more likely to quit.

Only give up or reduce spending on what you can afford: there’s no point in saying you’ll reduce your spending by more than you know is possible. Set realistic budgets that you know you’ll be definitely able to stick to, and if you’re finding it easy, you can always budget to spend slightly less next month.

Having nothing to aim for: you might know that you want to reduce your spending, but what for? If you don’t have a specific end goal in mind, or something to work towards, you won’t be able to track your success and see how well you’re doing.

Create goals: targets give you something to aim for, so you can see when you’ve succeeded. Whether it’s saving up for a mortgage, a holiday, or something smaller like a night out with friends, you could feel more motivated to save when you can track your progress towards an end point.

Other people are making you spend: when you’re trying to stick to a budget, being around friends and family who aren’t as interested in saving can be tough. It can be difficult to hold your resolve and not ring up for that takeaway if your partner is encouraging you to spend.

Get someone else to budget too: whether it’s your significant other or just a friend, it could help you feel more inspired to stick to a budget if you’ve got some moral support. Your ‘budget buddy’ can help you to stay on the budget during moments of weakness, and you’re not as likely to feel as though you’re the only one making an effort to save.

Your budget isn’t flexible enough: so you’ve carefully planned out all areas of your budget but after the first month, you realise you’ve massively underestimated one area of your spending. This is the point where you may feel tempted to give it up, because you haven’t allowed for any changes in your budget.

Prepare to change it around: see the first month of your budget as a ‘test drive’, and realise that you’ll probably have to adjust some aspects of it for the second month. You may find that you spend more on something than you’d planned, but you could also find that you’re able to save more than you thought on something else. That’s fine – it’s all part of the learning curve.

Your budget’s too strict: if you’re someone who thinks living on a budget means you’re not allowed to spend anything on treats or leisure activities, this could be putting you off saving. Denying yourself any snacks or days out when you’re saving can make budgeting seem like a chore, meaning you’re less likely to stick to it.

Allow money for some fun things: budgeting doesn’t have to mean the end of all spending on leisure activities. Factor spending on fun things into your budget, so you know how much you can spend on afternoon snacks or nights out with friends over the month.

You aren’t budgeting to your means: if you work out your own budget from a template you find online or off someone else’s spreadsheet, you could be in danger of calculating what to spend based on someone else’s salary. There’s no right amount to spend on an aspect of your budget, it all depends what you’re earning.

Create a budget around your income: when you’re calculating your budget, work out how much you have to spend by looking at your actual take-home pay, with any taxes or deductions taken off. Work out your budget based around this, so you can keep your spending within your means.

Emergencies knock you off budget: you may feel that as soon as you decide you’re going to stick to a budget, it can seem like everything from your car to your washing machine starts to break down. Having to fix expensive items in an emergency can make it difficult for you to budget, especially if you’ve not accounted for any extra spending.

Plan for emergencies: obviously you can’t predict when certain crises are going to strike, and sometimes appliances just break down out of the blue, but keeping on top of car maintenance and jobs on your home could make it less likely that you’ll have a disaster.

You don’t have self-control: if the problem is that you just can’t stick to your budget no matter what commitments you make to saving, it might just be that you find it difficult to put money aside. Not everyone finds it easy to manage their finances, and if you have trouble with budgeting, it could put you off saving.

Don’t keep your credit card with you: if you know you’ll be tempted to buy when you should be saving, try to limit your access to easy credit. Leave your card at home, so you won’t be able to spend money when you shouldn’t.

Read Also: Tips to Help you Meet Your Financial Goals

You forget to budget for one-off expenses: similar to the point about not budgeting for emergencies, annual payments such as your car tax or MOT could trip you up if you forget to budget for them. As these don’t come around every month, you could miss them out of your plan, meaning you might be off budget when you do have to pay them.

Count them as part of your monthly budget: try to put aside money every month for these one-off payments. If you save up a little towards annual expenses each month, you’ll have a pot saved up when it’s time to pay. This could also help for budgeting for birthday or Christmas presents.

Finally

Your first budget is never going to be perfect. It’s pretty much impossible for it to work perfectly even if you’ve been doing it for years. Just focus on making small, measurable changes to your finances, and don’t worry to much about being perfect because perfect is an illusion. 

Budgeting is the most important thing you can do for your money management journey and it’s so important than you manage to get your budget right as early as possible!