5 Ways to Fix a Budget That's Not Working for You

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Life changes over time. Let your budget change with you.

A good budget serves as a financial roadmap, a way to know when you're off track, and a path toward your financial goals. That said, not every budget is a winner. Sometimes, a budget that once worked for you no longer serves its purpose. Here are some of the common budget problems you can run into and how to fix them.

1. You copied your budget from a book or website

When I began budgeting, I found my first budget sample in a personal finance book and decided to use that precise budgeting method to control my spending. There were copies of the budget on tear-out pages in the back of the book, and I was excited to get started. The problem was, it wasn't an exact fit. The basics were right: I had a mortgage, a car payment, and a weekly grocery bill, but there was no room for extras. The "black holes" into which my money disappeared involved things like dining out, charging stuff I wanted, and making other small purchases.

The fix: Create your own budget. I remember sitting on the living room sofa, creating a brand-new budget that included a pocket of "miscellaneous" funds I was allowed to spend on small purchases each month. That way, when I got to the end of the month and realized I didn't have much to tuck into savings, I knew where the money had gone. I hadn't yet learned about priority spending (we'll cover that in a moment), but I did have a realistic budget in hand.

2. Your estimates are overly optimistic

If your actual expenses rarely match your monthly budget, it may be because you're not budgeting for the worst-case scenario. Let's say it's the middle of August and you've budgeted $125 for your water bill, even though you water your garden once a day. But it's a drier year than usual, and you end up needing to spend more on water than you expected.

The fix: When it comes to budgets, it pays to be a pessimist. Why not budget too much for water, then shift any money you don't spend over to an emergency fund? If the water bill is high one month, the funds are already budgeted for, so you don't have to steal from another budget category to pay the bill. But if the bill comes in under budget, you're money ahead.

3. Your budget isn't moving you in the right direction

If you're saving for something important, like a down payment on a house or a new car, you may be frustrated by how little you have left each month to put toward that goal. It could be because your budget is upside down.

The fix: Remember that "miscellaneous" spending category I mentioned? Although it was good to account for those dollars in my early budget, what I did wrong was to spend that money and then save what was left. I should have saved and invested first and spent whatever was left. Today, before any bills get paid, I make sure a specific amount of money goes into investments and savings. What's left over is money I budget for the rest of our needs. I'll be honest: Prioritizing the future means living below our means -- rarely taking a fancy vacation, and thinking twice before we blow money. But (and this is big), priority spending is moving us in the right direction, and the trade-off is worth it.

4. Something always comes up

It's easy for a budget to get knocked off course by bills that don't come due every month. You may be sailing along, feeling good about your budget, when a car tag renewal arrives by mail and messes everything up.

The fix: Sit down with your preferred beverage and use your bank record from last year to create a list. Beginning with January, take note of any bills not paid every month. Whether it's property taxes, rabies tags, auto insurance, homeowners association fees, birthday gifts, or any other irregular expense, add it to the list next to the month it's due. Then, when you draw up your next budget, add these irregular expenses in where they belong.

5. There's zero breathing room

Following an economic hardship, like a job loss or severe illness, it's tempting to create a tight budget. Unfortunately, this budgeting method often doesn't work in the long run. There has to be some wiggle room in your budget so you can sleep at night without worrying about what's going to happen if one category of your budget is totally off that month.

The fix: Create that wiggle room. Let's say old friends call and ask to spend the weekend with you. You need to run to the grocery store but have already spent your allotted grocery budget for the week. Rather than borrow from next week's budget or stress about where you'll find the money, create some breathing space by building a little extra cushion into your budget. It may be $100 to $200 a month that you earmark for unexpected extras. Just as you would do with funds left over after budgeting for a worst-case scenario, save or invest any wiggle-room funds you don't end up needing.

The vital thing to keep in mind with any budget -- whether you use an old-school budget or a budgeting app -- is that life happens. There will be unexpected expenses, and the best you can do is anticipate their arrival. And if you find that your budget is off track more often than not, you know it's time to adjust it to fit your current circumstances.

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