Busted! 10 Reasons Why You Fail At Your Budget
With the end of January, and probably your first month of resurrecting your budget, you’ve probably realised that you have already overspent by half a thousand than what you initially planned.
Creating a budget is easy, sticking to it is tough. However, a little tweak to your habits and thoughts can work wonders.
Don’t fear your budget – make your budget work for you, instead of against you. You are not the only one who fails at your budget once in a while, and it’s probably due to these 10 pesky reasons:
1. You make your budget boring
When you create a budget, you simply compile your bills, categorise them, and set a limit. At the end of the month, you run a comparison between your budget and real spending to see how it has turned out.
Solution: Make it fun by adding competition into the equation. Compare with your spouse or friends at the end of the month and see how each other fare. The punishment? Maybe a meal on the loser?
2. You forgot to include the “non-recurring” or “emergency” expenses
Remember some bills are incurred quarterly or annually like car insurance, car servicing or house quit rent. How about emergency expenses like your pet or your child getting sick, or even your car breaking down?
These expenses can completely derail a carefully planned budget. Once your budget is off, it may take months to get back on track.
Solution: List down every item that you spend on daily, monthly and annually. Calculate and establish how much you are spending on, and how you can adjust your expenses. Also, build up an emergency fund of at least six months’ of your income.
3. You set unrealistic expectations
It may have taken you days or weeks to come up with a budget that includes everything that you could think of, down to every sen you spend. However, you still overspent your budget by RM400!
Solution: Maybe you severely underestimated that grocery bill? Don’t worry though, understand that you will not be able to create a perfect budget the first time. Tweak your budget as you go. It is also important to include a buffer in your budget.
4. You are using the wrong tools
Are you managing your budget using pen and paper? Is it easily accessible and are you able to keep track of all your income and spending? Not using a tool properly or not knowing about the tool can very well contribute towards epic budget failure.
Solution: Whichever way or tools you use to create your budget, ensure it is user-friendly, that you can easily keep track of everything. If you are a techie, consider using an app, or even stick to good old Excel sheet.
Check out our recommendation of financial apps that can help you with your budget.
5. You are too restrictive
Going cold turkey may not work for the most of us. If you succeed, you’re going to show a hefty surplus at the end of the month. However, if you fail, you may just throw in the towel and toss your budget in the garbage.
Solution: Be ambitious yet realistic. Cut back in a few areas at a time, rather than trying to completely overhaul your lifestyle all at once.
6. You haven’t adjusted it since the beginning of Stone Age
The thing about budgeting is that it’s all guess-work until you put it into practice. You’re going to have to make adjustments month-to-month, and if you haven’t touched your budget since you first formulated it, it’s probably not working out very well.
Solution: Revisit your budget on a monthly basis. You don’t have to overhaul it every time – just take a few minutes to adjust it for an extra windfall, new commissions, fluctuating utility bills, or anything else you didn’t plan for in the previous month.
7. You are impatient
The truth is that budgets take time, patience, and a bit of trial and error before they really produce significant results.
Solution: Consider your first few months a testing period for your budget. If they don’t go smoothly, simply make some adjustments and keep trying again.
8. You simply hate budgets
A budget isn’t the be-all or end-all solution to financial management. The sight of spreadsheets and columns, and the mention of budgeting software makes you go crazy.
Solution: Try giving yourself a weekly allowance and be strict on it. This kind of regime teaches you how to conserve money without needing to track it meticulously. If you often end up overspending on certain things, get an envelope for every category in your expense list, like your grocery bill, entertainment expenses, or utilities. Then, put the allocated money into each envelope.
9. You over-categorise
If you like making lists, you may find yourself faced with over-categorisation. You have a category for everything – hair products, kitchen soap and cleaners, outdoor toys and the list just keeps extending. The problem with having too many categories is that it becomes very tedious to track a budget. And sometimes it’s difficult to estimate your monthly spending on smaller categories.
Solution: To overcome this, have a category called “Everything Else”. Pile all of your smaller discretionary categories into it, and as long as you keep the total spending below a specified amount, you’re good to go.
10. You deprive yourself of personal spending space
After three months of sticking to a strict budget can drive one insane. Cutting off your entertainment allocation into half is not the solution.
Solution: Having personal spending has always helped other areas of your budget feel less painful. Allocate a certain amount that’s yours to spend as you please. It doesn’t have to be much. It can be only RM50 each per month – you can buy a book, lunch and so on, without feeling an ounce of guilt.
If you stick to it, a budget has proven to work. It can help you make wiser financial decisions and give you a sense of control over where your money is going each month. However, budgeting is not an exact science. It takes work, tweaking, practice, and lots of trial-and-errors to make it effective in the real world.
If yours is tanking, don’t ditch it. Just retool it and try again until you find the right balance. Once you have your master budget, life just gets that much easier financially. 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.