The word "budget" brings up similar feelings as the word "diet" for most people; it means restriction and a lack of fun. While you may never get to the point where budgeting (let alone dieting) is something you consider fun, there are ways to make it a less painful process. Here are five reasons why you might not have been able to stick to your budget in the past - and how you can make sure to stick to one in the future. (For more on budgeting, check out The Beauty Of Budgeting.)
TUTORIAL: Budgeting Basics
1. It's Unrealistic
Perhaps the number one mistake budgeters make is not being realistic with their financial plans. On paper, it can look like an easy choice to just eliminate a "non-essential" line such as entertainment - suddenly, you're saving $100 a month, and your budget finally balances! However, your budget is only good if it works in practice, not just in theory. Whatever you spend money on, even the fun items, include them in the first draft of your budget. You may find it necessary to cut back in these areas, but eliminating them altogether may set you up for failure.
2. It Doesn't Allow for Indulgences
Like a diet that never, ever allows the consumption of "bad" foods, a budget that completely eliminates all indulgences just isn't going to work. Total up your spending on "treats" - whether it's a new pair of shoes, scuba gear or a latte on your way to work – and determine whether they make up a reasonable percentage of your budget. You will likely find that you need to cut back on your spending in this area, but allowing yourself a specialty coffee once a week can easily be included in your budget. Most importantly, allowing yourself small rewards can keep you from jumping off the deep end of your budget and making a major purchase because "you deserve it."
3. It Doesn't Prepare Your for Irregularities
If only every month's spending was identical. Unfortunately, your spending in January will likely be drastically different than in July and December (think of last year's Christmas bill, for example). Consider your budget as a yearly planning event and spread the costs of big-ticket times of the year like gift-intense holidays or birthdays by setting aside a small sum each month.
In the same vein, your budget must prepare you for one-time costs and emergencies. If the car suddenly breaks down, you don't want to find yourself without the cash to fix it. If you pay an annual fee on your credit card, don't get caught when that extra fee appears on your bill. Knowing your overall costs for a year will help you to plan more effectively. In addition, not being derailed by such costs will keep you from getting frustrated and throwing in the towel on your budget completely. (Building a better budget can take time; for help check out 6 Months To A Better Budget.)
4. The Structure Doesn't Work for You
Budgets come in many different forms. Some will advocate keeping a receipt log and sticking to the category limits you have defined. Some will simply separate essential and non-essential expenses with a spending limit on both, and some will seek to change how you spend completely by using all cash split by categories into jars or envelopes. Not every style of budget will work for you; it may take some trial and error to find the one that best suits your lifestyle.
The most important thing is to be honest about your own habits and preferences and be open to trying a few tactics before you find the one that works for you.
5. It's Not Up to Date
Budgets are not evergreen. Our financial and lifestyle circumstances are often in flux, so it's important to revisit your budget periodically to make sure it is accurate when it comes to your expenses and income. If you have started freelancing on the side, be sure to include that as income (with money set aside for taxes, if appropriate). If you recently took on a new car lease, you'll have to update your spending in that area. The more accurate your budget is, the better you'll be able to stick to it, and the more successful you will be at improving your financial position.
The Bottom Line
Budgeting doesn't have to be a bad word. As with many positive changes, budgeting is sometimes painful, but it is worth it in the end. Think of your budget as a permanent lifestyle change, and you'll find a realistic plan that can work with your life, instead of against it.
(If you current budgeting style is not working for you, check out 3 Alternative Budgeting Styles: Which One Suits You?)