Why Budgets So Often Fail (Part 1)
Last week I talked about how budgeting is hard, but so is living paycheck to paycheck. To be fair, that did simplify it a bit. The most difficult part of budgeting is budgeting correctly.
One issue that so many people face, and one of the reasons why their plans always fail, even after they decide to start budgeting, is that their plans have them spending next to nothing on all forms of entertainment. No happy hours with friends, no dinners out (or ordered in), no yoga classes, and certainly no vacations.
If your plan isn’t built around your life, and assumes that you’ll have one, it’s no wonder that you don’t stick to it at all, and throw up your hands saying “this budgeting thing is impossible! I give up!”. Instead of giving up on budgeting, change your budget instead. If your budget assumes you spend $20/month on entertainment when you’re used to spending $200/month, you’ll give up. In order to not give up on budgeting entirely, what about cutting back to $150 or $100/month instead? You have to build your plan around your actual life and what brings you happiness, instead of building your life around a plan of what you think you should be spending money on and being miserable all the time. Cutting out your daily latte run, if it truly gives you joy, doesn’t serve you.
The same thing goes for any and all budget categories. Clothing purchases and groceries, if you budget way too little for them, will seem impossible. Even if you know you spend more on them per month than you want to, try cutting back a little at a time. If you currently spend $500/month on food as a single person, next month try $450, the next month $400, down to where you think it should be. If you get to that amount and it truly is too restrictive, bump it back up next month!
Budgeting succeeds when you try new things and learn what works for your life and what doesn’t. Despite popular opinion, a budget is not a “decide on it once and never re-evaluate again” type of thing. Every month you should be thinking about what worked and what didn’t, and making changes from there based on your priorities, until you land on a budget that works for you long term.
Finding something that works for you with little change for the next 6 months doesn’t mean that it’ll stay stagnant forever. Maybe next year you get a raise, so you decide to throw half of that raise at paying off debt and the other half towards increasing your vacation budget. You’re allowed to do that! Maybe the year after that you get engaged and cut back in some areas to save up for a wedding. Or maybe you take a pay cut to work your dream job, so you decide to move into a cheaper apartment. Your life will have many changes, and your budget should change to match it.
Most people think about a budget as being restrictive, which dooms them to fail. A budget is your way of telling your money where to go, instead of your money telling you what you can and can’t do. If you tell your money to go places that seem like what you should do and not what you actually want to do, your budget is doomed to fail.
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Have you under-budgeted in some categories before? What happened? How much did you have to increase it by to get to a sustainable amount? Let me know in the comments!