Consultations available by video and phone with electronic signatures.

Budget Problems

What You Should Do If Your Budget Isn’t Working

Everyone should have a budget. No matter what you earn, it’s important to have a spending and saving plan. Without a budget, not only can you easily spend more than you should, but you’ll also have a very difficult time achieving any of your financial goals.

But sometimes budgets don’t work. Even if you’ve planned everything out, you might find that you’re still running out of money before the end of the month or that you just can’t make the budget balance.

If you’re in this situation, here are some reasons why your budget may not be working and what you can do about it.

You’re Not Estimating Accurately

One of the biggest reasons why a budget might not be working is because you haven’t estimated your expenses correctly. If you haven’t estimated enough for each expense in your budget, you’ll find it hard to stay within your limits.

To solve this problem, look at your spending over the last few months and figure out what you’ve spent in every category. For categories that change every month, use an average. It’s often in your best interest to estimate a little higher than the average just in case.

You’re Not Tracking Your Spending

Tracking your spending is important. If you’re not keeping track of how much you spend each month, and where your money is going, it’s very easy to spend more than you should.

You should track even the smallest purchases (because they quickly add up) and try to take note of everything you buy shortly after purchase something. This will ensure you don’t forget anything.

You Haven’t Included All Categories

Even if you included all your monthly expenses in your budget, did you also include some of your more irregular expenses? This means money you’d spend on birthdays and holidays, as well as yearly expenses (such as if you pay your home insurance yearly, for example) as well as irregular costs like property taxes. You don’t pay these costs monthly, but you still need to make sure you have money for them when it comes time to pay.

It’s often easier to put aside a small amount each month for these expenses than it is to try to reconfigure your entire budget for the months when you need to make these payments. Consider figuring out how much you’ll need to save each month to pay for your irregular expenses, then put this amount into your budget.

You’re Using a System that Doesn’t Work for you

When you’re budgeting and tracking expenses, it’s important to use a system that you can work with easily. Some people prefer to use an app on their phone while others would rather use a spreadsheet on their computer or a pen and paper.

It’s important to find the right system for you. If you’re trying to use a method that you find complicated or time-consuming, you’ll be a lot less likely to stick with your plan.

You’re Not Reviewing and Adjusting Your Budget

A budget isn’t something you write in stone and never touch again. With any budget, regular reviews must be conducted to make sure your budget still reflects your needs and goals.

It’s also important to do a review to find out if your expenses are categorized and estimated properly. For example, if you find yourself routinely spending more than your estimated total for gas – and having to take from another category to make ends meet because of this –  you might want to make a change to your budget to better reflect reality.

You’re Losing Motivation

It’s easy to lose motivation when you’re trying tor reach your financial goals. For instance, if you have a lot of debt and you’re trying to pay it off, it could take years to accomplish this goal. With long-term goals, it’s easy to lose focus.

One strategy to counter this is to set up milestones or mini goals along the way. You may even want to give yourself a small reward if you achieve these milestones. That will help you stay motivated and keep you going.

You Don’t Have an Emergency Fund

An emergency fund is important. Life is unpredictable and unexpected expenses come up all the time. If you don’t have an emergency fund and your car suddenly breaks down (for example), you’ll have a hard time fitting this expense into your budget. However, if you had been putting some money aside every month for emergencies, you’d be able to deal with such situations.

Add a category to your budget for emergency savings and make sure you “pay” it just like every other bill. Then, if you need the money in an emergency, it will be there for you. It’s important, however, to only use this money in emergency situations and not to deal with regular budget shortfalls.