What’s a money blog without a discussion about budgeting? I know many of you hear the ‘B’ word and automatically let out an exasperated sigh, or you get overwhelmed just thinking about it. Some folks get so frustrated because despite their best intentions, budgeting just doesn’t work for you.
It’s ok, relax. I agree, it isn’t easy. Especially if you grew up in a household where sound budgeting practices weren’t always understood, discussed, or practiced. If you don’t have this knowledge growing up, and never learn it in a classroom, how can you be good at it?
In the first of this two-part budgeting series, I’ll discuss the top reasons our budgets tend to fail. In part two we’ll dive into best practices, and I’ll share some of my favorite budgeting tools and tactics.
1. It wasn’t realistic in the first place.
People often start the budget process with the best of intentions. You’re going to put every extra dollar towards those student loans, give exactly 10% to church each month, leaving only $50 a month on incidentals. You’re going to pack a lunch every day, and turn down your friends when they want to go out for happy hour. They’ll understand, right? It sounds good, but when it comes down to it, the average person will struggle with this system unless they are tremendously disciplined. I’m not saying it’s impossible. But is it sustainable for the long haul? Ask yourself could you do that for an entire year? Six months? If the answers to these questions are no, then take a step back and think about what is necessary, but also realistically achievable.
2. You’re trying a method that doesn’t fit your lifestyle.
This is really an extension of #1, but I think it’s important enough to discuss separately. There are many experts out there who push various methods. I actually follow quite a few of these gurus. Some say you should put every dollar towards paying off debt first. Some say split what’s left after bills into thirds, and evenly save, spend, and pay down debt. Others suggest the envelope (or virtual envelope) method. Each of these has their merits. But that doesn’t mean it’s best for you, your lifestyle, and your goals. Budgeting is not the place to force a square peg into a round hole.
3. You didn’t plan for month-to-month variances.
A big mistake many people make is setting a static budget, that doesn’t take into account items such as upcoming weddings, travel, or even things as simple as the length of the month. July/August and March tend to be closer to five full weeks. Did you think about the extra gas, groceries and spending money that will be required? Is there a particular time of the year that is consistently more expensive than others such as wedding season, or the holidays? For me, May ushers in five close birthdays, Mothers’ Day, and at least one wedding. #Expensive
When does your car require routine maintenance, insurance & registration renewal? When does school tuition end, and summer activity cost begin? These are all items that can sabotage your budget if you don’t plan for them ahead of time.
4. You only consider the short-term.
The most successful companies make 3-5 year projections in order to align income and expenses with their future needs. So why are you budgeting week by week? I get it, you may not be working with billions of dollars (yet), but don’t you have needs that extend beyond this month? Now, I’m not suggesting you need to plan the next 3-5 years of your life to the letter (although it doesn’t hurt to think ahead that far). But there’s an important lesson to take away from this: Your budget provides the opportunity to make progress towards your long-term needs now! Before drafting your budget, did you consider major events or changes that you can get ahead of?
5. You spend or save “whatever’s left” every month.
Good people, this is a trap! I offer an example to illustrate. Let’s say it’s pay day. You got that delightful alert that your direct deposit went through, and you’re feeling great! You hop online and pay all your bills, and you see how much remains. Let’s say $350. Feeling accomplished, you decide to “treat yourself” today. You stop by Starbucks for your favorite latte, grab some lunch, then make plans for dinner and drinks with your friends. You just got paid and you’ve already spent $40. No biggie, you think. You still have plenty left to play with. You go on throughout your weekend, do a little shopping, hit the barbershop or the salon, go to church and put in “what feels right” and finish the weekend off with brunch, never checking your account along the way. Monday morning you check your mobile banking app to face the reality that you only have $120 left until your next pay. You’re so tied to the idea that you have to make that $120 stretch, that there’s no way you’re going to set it aside for savings. This feeling is a normal, emotional response, and prioritizing saving last doesn’t help! This cycle will repeat month after month, and before you know it, it’ll be November and you haven’t saved a dime this year! Further, if you’re spending whatever’s left after bills, you don’t have an idea of how much you’re actually spending each month, nor what you typically spend it on.
6. You lack the discipline to use it consistently.
On New Year’s Eve, you went to your friend’s vision board party, made a visual presentation of your goals for 2017, which included getting your money right. With your last remaining vacation day, you set up your budget, tucked it neatly inside your new purpose planner notebook. You were really good at first, consulting it every week, diligently checking off your income and expenses as incurred. Then somewhere around the time you gave up on the gym, you either forgot, brushed aside for later (which never came), or had an unexpected expense that got you off track. Now it’s November and you haven’t seen that thing since.
It all boils down to discipline. Either you want a healthy financial life or you don’t. Either you want those experiences that you work hard for, or not. Period. This is the hardest issue to tackle, because discipline is not something a blog, a financial coach, or even a nagging friend or family member can give you. It’s a decision you have to make for yourself. And continue making day after day. If you’re guilty of any of these, don’t worry. We’ve all been there at some point. What’s important is you pinpoint what you’re doing wrong, and commit to do better.
In part two we’ll dive into methods for correcting these mistakes, and get you on your way to budgeting like a boss.What’s the hardest part about budgeting for you? Are you guilty of any of the mistakes highlighted above? Let’s discuss in the comments.