6 Reasons Why Most Budgets Fail...

Creating a budget for your personal finances can be one of the most beneficial activities to take on, which will help you:

• Understand more about your spending habits.

• Find ways to reduce expenses.

• Increase your disposable income.

And much more.

But, budgeting can be a tricky thing to do well, and mistakes are common, for a variety of reasons.

Here are 6 reasons why your budget might be failing, and how you can get back on track to achieving financial success.

No Long Term Goal

It may seem silly, but the reason a lot of budgets fail is because people don’t give themselves something to work towards, in the form of an end goal.

It could be:

• To remove debt.

• Build an emergency fund.

• Start investing your disposable income.

Or something bigger, and more general, like to:

• Retire in the next 10 years.

• Achieve financial freedom.

You name it, and everyone’s is different, but the fact remains that you need an overall goal that will fuel your actions, and continue to give you the motivation necessary to:

• Make changes to your spending.

• Make financial sacrifices.

• Stop buying certain things.

So, don’t have an overall goal?

Think of one, and think big.

Because the higher you aim, the further you’ll go.

Before you take action, set a goal that you can use to drive yourself forward if things get tough.

Inaccurate Spending Figures

Budgets don’t have to be detailed, or fancy, but there’s one thing you need to make sure of:

Your budget’s numbers are accurate.

The success of a budget is dependent on the accuracy of it’s numbers, and how closely this portrays your every day life.

Say you have an objective to reach $500 per month in disposable income.

If you’re taking home $5,000 each month, and your budget says you only spend $4,500, you’ve succeeded, right?

Well, if the figures are accurate, of course.

But, the last thing you want is to think you’ve reached your goal, only for your actual expenses to be more like $4,800.

Then, you’re left scratching your head wonder where the other $300 went to.

The accuracy of your budget is crucial. Take plenty of time to ensure your budget is accurate, so you can reach your financial goals.

Not Accounting for Emergencies

This is similar to the point above, and it’s still along the lines of having inaccurate figures.

When budgeting, it can be hard to account for everything, all the time.

You’re always paying for things you had no intention of paying for, because… well that’s life.

• A broken down car.

• A broken window.

• A new phone/TV.

It would be a smart idea to put some money towards these unexpected expenses each month, so if something does come around, your budget won’t take a hit, and it’ll already be priced in.

A lot of finance experts will recommend you to build a 3–6 month emergency fund, which you can take from so your budget doesn’t get hit.

Build a small emergency fund so your budget won’t take a big hit, if an unexpected cost occurs.

Being Too Strict

The main aim of a budget is to set rules for yourself, so you can better your financial position.

But, there comes a point where the rules you’ve set for yourself, become too strict, which makes it unsustainable.

A budget isn’t something you do for a while, and then stop.

It needs to be something you can do until you hit your goals, which could take you:

• Months?

• Years?

• Decades?

So, a budget has to be geared towards reaching your goals, but it also has to be tolerable, and in a way, enjoyable.

You shouldn’t be too strict on yourself, as you risk falling short of whatever goal you’ve set for yourself.

Prioritise sustainability over intensity.

Set rules that will help you achieve your goals, but make sure they aren’t drastic enough to make you quit after 2 months.

Not Reviewing Regularly

Things in our lives change all the time, especially from a financial perspective:

• Income — switching careers or a job promotion.

• Expenses — inflation, price increases etc.

You name it, change is inevitable.

And this is why it’s important to review your budget and it’s figures regularly, say at least biannually.

Review your budget every few months, so it doesn’t fall behind what’s happening in real terms.

Not Taking Action

“Insanity is doing the same thing over and over and expecting different results.”

If you want different results (output), you need to take different actions (input), and a lot of people’s budgets fail because change is something that isn’t welcomed, and in some cases, feared.

It’s a similar story to someone trying to lose weight by going on a diet.

Sometimes, people like the idea of losing weight, but don’t like the idea of putting in the work to get it done.

• Calorie deficit.

• Exercise.

• Saying no to things they’ve never said no to before.

Become comfortable with making lifestyle changes, to drive yourself towards a better financial future.

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