5 Reasons Your Budget Isn’t Working and How to Get Back on Track
Think of all the words you’ve used to describe your budget. If the terms “complicated,” “confusing,” “time-consuming,” or “outdated” come to mind, that’s okay! You certainly aren’t alone. The truth is, budgets are hard. Not only do you have to set up all of your accounts and categorize your expenses, but you also have to monitor, analyze, and adjust your budget regularly to reflect your true spending needs and habits.
If your earning and spending were identical from month to month, you wouldn’t need a budget. But the reality is, with consumers making an average of more than 68 transactions per month, it can be challenging to keep track of weekly—let alone monthly, quarterly, or annual—trends in spending.
This irregularity is why most of us are afraid to face our budget. It’s hard to admit you’re not in control of your budget and that instead, your budget is controlling you.
If you routinely fear that you’re running out of money or that you don’t have enough to bankroll your biggest priorities, then keep reading. While you might be struggling with budget problems right now, after reading this article you’ll be able to diagnose and amend your budget so you know where incoming money is going before it even arrives.
Budget Problem #1: You Don’t Know Your Goal
You’ve heard of the saying, “keep your eyes on the prize.” But what if you’ve never taken the time to think about what the prize should be? When budgeting gets hard, as it inevitably will, the motivation to stick to your budget fizzles fast if the reason why you’re budgeting isn’t top of mind.
By identifying the specific financial goal(s) that will result in your ideal vision for the future, you’ll feel less deprived when you have to consider the sacrifices you’re making in the present. You’ll also have a standard by which you can measure the success of your budget. So to keep your eyes on the prize, gain clarity about your ultimate financial goals by asking yourself the big questions:
Why am I trying to get better with my finances? Why am I budgeting?
What do I care about, and what kind of budget do I need to get there?
What does the future me need and want, and how can my current budget contribute to my future lifestyle?
I encourage you to write the answers to these questions down on paper and post them somewhere you can see them. Whether it’s your refrigerator, your bathroom wall, or your office space doesn’t matter. Simply posting your goals somewhere you’ll see them often is the best way to keep them top of mind.
Defining your prize is also about making your money work for you. Popular budgeting app You Need a Budget (YNAB) advises budgeters to “give every dollar a job.” If every dollar has a job, then you prioritize those dollars by determining how they will be spent.
You put a lot of intention into making your money. Put as much intention into defining your goals, creating your budget, and maintaining your commitment to that budget to meet those goals.
Budget Problem #2: You’ve Overcomplicated Your Budget
Maybe you’ve added too many sub-accounts or your budget categories have become unruly. Or perhaps you’ve tried to break down each purchase into different budget categories after your last big-box store run, only to feel overwhelmed and defeated. Your budget is probably too complicated for the time being.
Overcomplication can be a form of procrastination. Sometimes, the initial high of creating a budget is addictive, especially with all the bells and whistles available on budgeting apps and templated spreadsheets out there. If your budget takes too much time to set up, then it will most likely take too much time to manage.
Instead, simplify your budget and remind yourself that it doesn’t have to be this way forever. You may not initially get all the spending data you want, but you will get the data that helps you stick to a reasonable budget-management plan: data that will help you take action.
Budget Problem #3: You Don’t Check Your Budget Enough
It’s hard to know what kind of budget problem you have if you don’t dedicate time to studying it. The average person makes two to five transactions per day. Fortunately, most budget apps allow you to link to your accounts so the app can import those transactions and categorize them for you. This makes it easy and reasonable to check your spending daily. Plus, you can immediately recognize the impact such transactions have on your goals.
The more frequently you check your budget, the easier it is to tailor your habits. Not to mention, if you’re exceeding your goals in one spending category, then you can permit yourself to indulge more in another. When you put off budget-checking for too long, it becomes harder to see expense patterns and nearly impossible to course-correct. It’ll also take longer to maintain your budget each time you sit down to do it.
Procrastination—that is, waiting until the end of the week or month to check your budget—can be overwhelming. Instead, make budgeting a small part of your daily routine. (It shouldn’t take more than five to ten minutes a day.) By automating budget-checking, you control your budget and not the other way around.
Budget Problem #4: Your Expectations are Unrealistic
As you consider making changes to your budget, it’s important to manage your expectations. While drastic changes to your spending may appear to have an immediate and impressive impact, you’ll likely find that they aren’t realistic. Commit to sustainable changes that will have a greater impact in the long run.
For example, while slashing your allowance in the “eating out” category by 50 percent might accelerate your savings goals, a slow-and-steady reduction of 5-10 percent per month might be more suited to your current lifestyle. Once you’ve mastered a few months with the modest target, consider making additional incremental changes. It’s easier to follow through with realistic plans. Plus, if you become resentful of your budget, you are more likely to abandon it.
When you focus on where you currently stand, you set yourself up for disappointment. Instead, focus on where your financial path is leading you—that is, where you’ll someday stand. Take pride in the plan you’ve made for yourself, and make adjustments as needed and desired. These adjustments are at the heart of budgeting.
Budget Problem #5: You Spend More than You Make
If you’ve got a champagne appetite on a beer budget, then one of the surest ways to fix your budget problems is to age your money. To do this, you need to focus on three numbers: cash inflow, cash outflow, and the budget itself. For the majority of Americans who live paycheck to paycheck, cash inflow and outflow are identical, leaving a razor-thin margin for savings. To save money, one needs to spend at a slower rate.
You’ve also heard the saying, “a penny saved is a penny earned.” This reflects the mindset of someone who is aging their money. While the actual computations for “aging money” are a bit more involved, most budgeting apps will perform these functions for you. If you follow your budget action plan, you’ll receive monthly notifications that read something like this: “On average, you save x more dollars than you spend.”
Budget Smart With Financial Fitness Coaching
Here at Financial Fitness Coaching, I’m on a mission to help you create a budget for both your personal and business finances that matches your unique values and goals. I promise you, you’re not alone. That’s why I’ve developed a free mini-course to help you get started on your budgeting journey.
With Financial Fitness Coaching, you’ll get even more personalized and proactive strategies to help you face your finances with confidence, along with supportive coaching that will set you on the path to building your wealth. If you’re interested in finally taking control of your financial situation, you can email me at kristen@financialfitnesscoaching.com or schedule a free 20-minute Discovery Call on my calendar.