7 Reasons Your Budget Isn't Working for You

A bespectacled woman looking upon her bills with concern.

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There are so many ways it can all go wrong.

A budget is a fundamental component of financial health, but not all budgets are created equal. Too often, people go through the motions of creating a budget, only to have it fall apart after a few weeks or months. If this has ever happened to you, one of the following reasons may be at least partially to blame.

1. You don't stick to it

The best budget is worthless if you don't have the discipline to stick to it. It's OK -- helpful even -- to make periodic adjustments to your budget if the one you initially created isn't working for you. But you can't disregard it completely when you want to buy something that doesn't fit into it. 

Sticking to a budget requires a healthy amount of self-control. You can make it a little easier on yourself by making a list of your long-term financial goals and reminding yourself of them every time you're tempted to overspend. You could also use a budgeting app to track your spending to help hold yourself accountable.

2. Your expenses exceed your income

Your budget is supposed to help you figure out how to allocate your money so that you can cover all your expenses without taking on debt, but if your expenses exceed your income, there's really no way to avoid debt. You must either decrease your expenses or increase your income until you find a balance.

It's easier to cut expenses. Look through your budget for places you could cut back, like dining out less or canceling subscriptions. Trim them back until your monthly outgoings are less than the amount you have coming in. 

If you decide to go the other route, you could try starting a side hustle or working overtime. But be aware that these strategies might not generate as much additional income as you'd banked on, especially if you can't work as much as you'd hoped each month. Finding additional sources of income may help you balance your budget, but it's not always practical.

3. Saving is your last priority

Whether it's retirement, buying a home, buying a new car, or taking a trip somewhere, you probably have some long-term financial goals. You likely can't pay for any of those things with the extra cash left over from a single paycheck, so you'll have to save for them a little at a time. 

Your basic living expenses should be the first things you include in your budget, followed by your savings goals, and finally discretionary spending. If you place discretionary spending before your savings plans, you risk overspending on discretionary items and not saving anything for your goals, or at least extending how long it takes to reach those goals.

4. Your budget is all work and no play

At the same time, you do have to allow for some discretionary spending in your budget. If you don't ever allow yourself to have any fun, you'll probably grow sick of your budget faster and be more inclined to start breaking its rules. 

The 50/30/20 budget model suggests spending no more than 50% of your monthly income on basic living expenses, 30% on discretionary purchases, and 20% on saving. But if you want to be conservative, flip the last two and limit yourself to 20% on discretionary purchases and 30% on saving. Or you could split them down the middle and spend 25% on each. Play around with a few scenarios to decide which is best for you.

5. You forgot some expenses

A month or two into your budget, you might realize you left out a few things. That doesn't mean your budget is ruined, but you will have to adjust it to include these new expenses. Irregular expenses -- those that come up once a year or every few months -- are easy to forget and more difficult to budget for. A good strategy is to divide each of these expenses by the number of months you have to save for them and set that much aside each month so you'll have enough when the time comes.

Reduce your risk of forgetting expenses by combing back through your bank and credit card statements for the last year, if you have them available, and look for any expenses you may have forgotten to include when you first created your budget.

6. You made it too complicated

Budgets that are too granular can backfire on you. It makes sense to keep track of how much money you spend on groceries every month, but you don't need to make note of what you bought each time and how much each item costs. This just becomes too time-consuming and it might make you more inclined to neglect your budget over time.

You have to walk the line of having a budget that's detailed enough to be useful but not so detailed that you don't want to go through all the work it takes to maintain it. Budgeting apps can help take on some of the work for you, including totaling up how much you've spent in various categories each month so you don't have to do this math yourself.

7. It's not emergency-proof

Any budget can get blown up if you're unprepared for surprise expenses, like a job loss, medical emergency, or insurance claim. That's why you need an emergency fund that can cover these unexpected costs so your regular budget stays intact. Aim for at least three months of living expenses in your emergency fund to start with and consider upping it to six months later on. If you have a high health insurance deductible, make sure there's at least enough money in your emergency fund to cover it in case of a medical emergency.

Make an emergency fund one of your savings goals in your new budget if you don't already have one. Allocate some money toward this each month until you reach your target amount. You'll also have to replenish your emergency fund after you draw upon it.

Budgeting is a simple idea, but it's a little more complicated in practice. As the list above shows, there are a lot of ways it can go wrong, but if you do your best, make adjustments as needed, and stick with it, it can pave the way to greater financial security.

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