12 Reasons Your Budget Isn't Working
How to Troubleshoot Your Budget
Using a budget to manage your money is the key to paying off your debt. But sometimes, your budget may not work. There are many reasons for the budget breakdown. The numbers may not match up, or you may simply be spending more than you budgeted for. Here are some of the common reasons budgets don't work, along with ways you can get your budget back on track.
You Haven't Given It Enough Time
Budgets usually tackle spending and debt issues with long-term plans, and they rarely have an immediate effect. If you're a few months in and you haven't noticed an impact, you might simply need to be patient. What you can do in these first few months is reassess your budget and make adjustments as you learn more about your actual income and expenses.
Your Expenses Are Higher Than Your Income
If your net income (income minus expenses) is a negative number, then you're spending more money than you make. The problem isn't the budget, it's your spending. Review each spending category and figure out which ones you can cut back on.
This can be a difficult exercise, especially if you're overspending in areas that make you feel comfortable. However, learning to live within your means will put you in a much better financial position.
You Don't Have Enough Money Budgeted for Some Categories
It's easy to underestimate how much you'll spend on some categories, especially costs like food and gas that can vary greatly from one month to the next. If you see that you're consistently overspending your budget in those categories, you might need to increase the budget for those areas. Remember that it could mean cutting back your spending in other places to keep from going over budget.
You Aren't Sticking to It
You have to actually use your budget if you want it to work. Don't just write the numbers on a piece of paper, stick it in a drawer, and forget about it. Refer to your budget frequently throughout the month. Track your spending and compare it to what you've budgeted to see how you're doing.
You Didn't Leave Any Room for Fun
Living on a budget doesn't mean you can't enjoy your usual hobbies and entertainment. In fact, you may find that you have an easier time sticking to a budget if you decide ahead of time how much you're going to spend on recreation. Cutting out all the fun will make you resent budgeting—that's not the goal, and it increases the chances of you scrapping the budget altogether. Keep it reasonable. You can still have fun without blowing your budget.
You're Focused More on the Tool Than the Plan
A successful budget doesn't require the latest spreadsheet or financial software. It might be fun trying out new apps, but you could jot down your budget on a napkin and make it just as effective as any electronic budgeting tool. If you're getting to distracted by the software, go analog for a few weeks then catch up in the app at the end of the month. On the other hand, if your budgeting tool is making you hate budgeting, look for alternative budgeting tactics. Print a few copies of this printable budget worksheet to get you started.
You Aren't Adjusting It
A budget isn't a legally binding contract that can never be changed. On the contrary, you should adjust your budget from time to time, especially in the beginning as you learn more about your spending habits and real income. If your income or expenses change, make sure your budget reflects the changes. Major life changes like a marriage, divorce, or the birth of a child will require a similarly substantial budget adjustment.
You Aren't Practicing Self-Discipline
Sticking to your budget will require you to say "no" to some unplanned purchases. If you've got your eye on a big purchase, forgo it at least as long as it takes to check your budget and see if you can afford it. Practice self-discipline and delay some purchases, especially if you haven't explicitly budgeted for them.
A diet won't help you lose weight if you cheat on it, and the same goes for a budget. It's common for novice budgeters to overstate their income or understate their expenses. The problem is, no one is going to punish you for cheating on your budget, but that doesn't mean there aren't consequences. Instead, the consequences will silently pile up until they get to a point you can't ignore, forcing you to dip into savings to pay for regular bills or deal with debt collectors.
You Forgot to Include Some Expenses
If you don't include every expense in your budget, it can seem broken when you compare your spending to your income at the end of the month. Use canceled checks, online banking services, and ATM withdrawal receipts to capture all your expenses.
You Didn't Budget for Annual Expenses
Not all your bills have monthly due dates. Some bills, like insurance premiums or property taxes, are only due once a year. If you don't include these expenses in your budget, they'll take you by surprise. Budget for annual and semi-annual expenses by dividing the total expense by 12 or six. If you put the money away during the year, those hefty expenses won't blow your budget.
You Don't Have an Emergency Fund
An emergency fund keeps you from having to spend out of pocket for unexpected expenses. If you don't have an emergency fund right now, start putting a few hundred dollars away every month until you build solid savings. A standard target is to aim to set aside three to six months' worth of living expenses.
If you're in a dual earner household, experts recommend setting aside at least 3 months of living expense. If you the sole earner in the household or if there is a significant difference in the level of income in a dual earner household, consider setting aside at least six months of living expenses