Budget: a two syllable word which makes many of us groan. For some reason people tend to dislike the word “budget” it has a negative connotation and often brings to mind the thought of stress over money and lifestyle deprivation. In reality, budget is a great word, and budgeting is a great concept. While the idea of budgeting may not bring you excitement, it is crucial to your financial health. Throughout my experience as a debt resolution attorney for over 20 years, I have become very familiar with typical budgeting mistakes and how to fix them. Nearly everything worthwhile comes with a learning curve and budgeting is no exception. There may be various reasons why your budget isn’t working, and most have simple fixes!
Here are five reasons why your budget may not be working in your favor and how you can fix it.
"It’s so important to have a 'what if' fund to avoid relying on credit cards, personal loans, and other forms of self-imposed debt."
1. Not making friends with your budget
Don’t laugh but I have known people who would rather have dental work done than work on a budget. For them, a budget is an enemy. If budgeting makes you cringe as well, my first step would be to tell you to wave the white flag!
The Fix: A budget is your ticket to getting out of debt, saving money, and achieving your financial dreams. In short, your budget is the best financial friend you can have. For those who are resistant to make the leap from foe to friend, I suggest naming your new budget. Name it Desire for something you’d like to be able to afford eventually, or Bill because you want to emulate Bill Gates. Whichever name you choose, the second you give your new budget a name it ceases being an enemy and starts being your friend.
2. It’s Not SMART
“Smart” budgets are specific, measurable, attainable, realistic, and trackable. Have you ever thought to yourself “I’ve been good about my spending lately” only to take a look at your account balance and wonder where all your money has disappeared to? If your budget does not accurately reflect your expenses every month or sets unrealistic spending limits, there is no way it can work.
The Fix: Making a SMART budget can be scary because it requires you to get down in the nitty-gritty of your bank statements each month. It can also be time-consuming to make a SMART budget. Do it in a place where you have minimal distractions and where you feel relaxed. Whether it is in a bubble bath or in bed, being in a stress-free environment will make creating your budget that much easier.
3. Omitting One-Time Annual Expenses
If you’re not tracking your expenses accurately, this may lead you to go over budget. Keeping track of consistent monthly expenses like mortgage and utilities is easy because you pay these monthly. However, your once-a-year or semi-annual expenses like taxes and insurance premiums have to be a component of your budget as well.
The Fix: The more details, the better! When you first begin budgeting, make a new budget for each month and mark on your calendar which months you pay your annual or semi-annual expenses. This also includes subscriptions, dues, membership fees, annual credit cards fees, etc. After you get the hand of it create a new budget every six months, or when something significant changes in your financial situation.
"Have you ever thought to yourself 'I’ve been good about my spending lately' only to take a look at your account balance and wonder where all your money has disappeared to?"
Photo Courtesy of longliveyourmoney
4. Not Preparing for the Unexpected
Just when we may think we have a handle on our lives, unexpected turn of events can happen, whether you are faced with a busted air conditioner or an impromptu trip to the ER. If you do not have the funds to cover these unexpected expenses you can dig yourself into a hole called debt. It’s so important to have a “what if” fund to avoid relying on credit cards, personal loans, and other forms of self-imposed debt.
The Fix: Incorporate into the expenses portion of your budget called the “what if” fund. Make regular contributions and if you take money from it be sure to replenish what you took out. This fund can rescue you when trouble occurs, or act as a welcome source of cash when you need it most. Having the fund available will give you an extra layer of security and serve as an incentive to continue budgeting.
5. You’re Not Sticking to it
By far the most common reason your budget isn’t working is because you simply are not abiding by it. Whether it is an inability to say “no” or because you aren’t paying attention, the bottom line is it can’t work if you do not stick to it.
The Fix: Budgeting can be like working out; you are really motivated and excited at first, but slowly you get tired and lose interest. It is essential you push through this boredom. If you are struggling, consider budgeting with a friend! Just like you may exercise with friends, budgeting with friends can have the same effect. You can motivate and push each other to get the most out of your budget.
Once you begin budgeting and see how easy it is to turn your bad debt into good debt (and reap the financial awards that come with it), you will wonder why you ever thought it was an impossible task. Your budget shouldn’t be an added stressor but a source of stress relief. Remember your budget is your friend and just like any other relationship you need to give it proper tender loving care, set a date for it regularly.
WRITTEN BYLeslie Tayne