Why You Failed at a Budget

Did you failed again at doing a budget?  After a few months it just wasn’t working and you gave up.  I know I used to have that problem.  You plan it and put all into neat categories and then somehow it all comes apart on you in a few months (or less).   Yet why did you fail?  Well I’m not an expert on this but here is where some things went wrong for me.

  1. Too Much Change.  People often try to go from overspending to saving by huge amounts in record time and then get frustrated by the entire process and quit.   It’s sort of like a crash diet.  It doesn’t work that way for most people.  Phase it in slowly.  Stop over spending and break even for a month or two then start to devote a bit more to paying down debt.  Slowly change your life and you will see results.
  2. Not Enough Data.  Another major issues budget fail is people assign numbers with no idea with what they are really spending in a month.  So instead of just trying to create a budget from a magazine article, make one based on how you actually spend.  Just track your spending for a month and then use that as a template for a budget.  It won’t be perfect the first time, but it will be closer than a  budget that wasn’t even based on your life.
  3. Not Expecting Changes.  Budgets are not static numbers in a sheet, especially in the first few months of using one.  Don’t worry about having to change the numbers that is a normal part of a budget till you get a good handle on what your spending is.  For example, you might realize you had a low power bill the month you started up your budget and need to move that amount up a bit.
  4. No Controls.  Budgets don’t work unless you have some sort of controls on some areas of your spending where you know you are likely to go over.  That is why I use cash for certain items in a month like spending cash and gas.  Otherwise I would have no idea what I’ve spent so far.  Cash makes it easy to track those minor transactions and do some quick planning by looking at what cash you have left.  For example, if  I’m going out on Saturday night and down to $40, I guess I shouldn’t go out on Friday as well.
  5. No Misc line or float.  Life happens when you don’t expect it.  It’s a fundamental rule, unexpected things keep showing up all the time and often with a bill.  Some common examples for me are those low cost fixes to the house like insulation on the hot water pipes or a new towel since the kid spill bleach on the old one.  So rather than getting frustrated by it, plan for it.  Keep a $100 a month or more around for those things that just happen.  If you don’t spend it you can always just add it to your emergency fund (if you have one) or even start an emergency fund with the leftover.

That’s my thoughts on why budgets fail.  Have you failed at a budget, if so was it one of these items?  Or if it worked, what made the difference?

One thought on “Why You Failed at a Budget”

  1. #5 is the item I had to learn. Budgeting too tightly leads to ups & downs, both in emotions and bank balance, whereas having a “slush fund” allows you progress steadily to your goal.

    Surprisingly, the amount going to my slush fund (and it is NOT the emergency fund, mind you!) is nearly half as much as the amount going to savings. The slush fund has managed to pay for all manner of misadventures this year (refrigerator compressor, riding lawnmower drive belts, bathroom cabinetry, and a beater SUV for the fishing trips)… items that some might pay from the emergency fund, but for me they come from the slush fund.

    Periodically, if the slush fund is getting too large, then the excess money is swept into investments.

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