Many individuals and families try to create a budget. They write down monthly expenses or enter them into a computer program. They make a commitment to sticking with it. But, within a few months, the budget is busted. Why does this happen? Why can’t you stick to a budget plan that you’ve taken the time to commit to either paper or electrons. Here’s why this happens so often.
Unexpected Life Events
Often we’ll only look at the upside when we plan a budget. We don’t count on unexpected events throwing our carefully crafted numbers out the window. The tendency is that when a crisis comes up is to stop tracking our expenses and otherwise forget our plan. To avoid this trap, make sure that you track these emergency expenses just like your regular ones and stay on top of your bills, even if you have to contact creditors about extensions. It’s also good to have a crisis plan so that if your life takes a twist or turn you won’t be totally blindsided by it.
A Dollar Here, A Dollar There
Another budget buster is not tracking trivial expenses. It’s easy to get into the attitude of, “Hey, it was only $4 for that double espresso. Why should I keep up with that?” Pretty soon that trivial expense either becomes a daily, untracked, expenditure or that ‘trivial’ $4 multiplies to $8 to $16 and so forth. When you do track this kind of spending it will surprise you how much this adds up on a monthly basis. To avoid this trap, track all of your expenditures. Another trick is to budget a personal ’slush fund’ on a pay period basis for small cash purchases. If you use up the fund, no going back to the well until next time but if you don’t spend it all you’ll have more next time around.
Not Being Realistic
As I mentioned above, we often only look at the upside. But sometimes we’ll venture off into fantasy land. This most often happens with flexible expenses such as groceries, fuel and some utilities. We may assume that we can drastically cut our expenses but then reality strikes. Many people give up at this point, saying it’s impossible. To avoid this one, make sure that you know how much you’re spending on average for a week or month. You may even find it helpful to just track expenses closely at first before any serious belt tightening so that you have a better grip on your situation.
No Reason To Budget
Perhaps the biggest reason budgets fail is that people attempt to do it because someone told them to do it. Perhaps you read a book or an article like this one and thought, “Oh, I should have a budget.” The thing is that this won’t stick. It’s not your goal. You don’t have a reason that applies directly to your situation. The way to deal with this is to find your reason to budget. It might be to save for a house or car purchase. It may be for a trip. It may be to get out from under the day-to-day financial stress. Find your reason to budget and put it at the forefront of any purchasing choice you’re faced with. Otherwise, you’re almost certain to scrap it due to lack of personal motivation.
Do you have a budgeting trick to share? Do you have a long series of busted budgets? Please leave a comment to share your thoughts on this topic.