6 Reasons Your Budget is Failing & How to Fix It

A budget fail sucks. Because budgeting can be the keystone to successfully managing your money. However, life isn’t perfect, and we as humans are not perfect. And you may find yourself struggling with your budget. In today’s post, we will go over six common reasons your budget is failing and how to fix it and avoid those feelings of budgeting failure. 

1. You budget in dream land

You look at your budget to cut expenses and not at your spending reality. We can all dream big dreams, but they are not always based in reality and this is especially true when it comes to your budget.

When you’re going to look at your budget to cut expenses, you need to take into account your spending reality. Which is why it’s so crucial to track your expenses before building out your first successful budget. A successful budget is based in reality and on what you’re spending.  

Because big cuts and jumps are really tough to make when you don’t realize just how much you’ve been spending one area. You may be budgeting $200 for groceries but in reality you’re spending $600 on groceries and eating out every month. So trying to get down to that $200 is pretty much setting yourself up to fail.

How to fix it

Before making cuts in your budget, go back and look at your spending over the last 2 to 3 months minimum. Categorize every expense. So you know just how much you’re actually spending in each category then make a small cut and try to keep cutting that expense down each month, is a long term goal to have a certain budget for a category in six months.

2. You forget to factor in big irregular bills

Now in the previous example I said to go back and look at your expenses in the last 2 to 3 months minimum and there is a reason that it is the minimum. You may actually want to go back further, because often everyone has big irregular bills that only get paid a couple times year.

For example, car insurance, or renters insurance, or car registration, or membership dues.

If you’re forgetting to factor these big bills that only come up a few times a year into your budget you’re going to fail because you’re not gonna have the money set aside for them when the time comes due. Which means you’re going to be scrambling.

How to fix it

Look around at all the stuff you have and try to think about the bill associated with them. Make note of how much each one cost. And then be sure to factor them into your monthly or weekly or whatever period budget.

3. Your Categories Don’t Align With Your Priorities

Another problem people face and the reason why their budgets fail is because their priorities don’t align with their budget. You may want to travel a lot, or take a class, or get better at cooking. But your budget is instead aligned toward spending money on going out to dinner or the movies or on little things that are taking away from reaching your goals.

How to fix it

Before you can fix it, you need to realize what you really want to accomplish with your budget. Chances are, a goal like, pay your bills every month, isn’t going to cut it. You need to know what you’re working towards, be it being able to retire early, or go on a vacation, or to go see your family, whatever your goal is you need to have it in the forefront of your mind and it needs to be a part of your budget. So be sure to include your priorities in your budget and not just copy someone else’s budget expenses categories etc. Do what’s gonna work for you.

4. You forget to actively budget

Another reason your budget might be failing is because you aren’t actively budgeting. Unfortunately, budgets and I’ll like crockpots, you can’t set them and forget them. You have to actively stay on top of them and track your expenses throughout the month to ensure you’re staying on budget.

How to fix it

So how to fix not actively budgeting? By regularly checking in, maybe it’s once a week or certain time every day, but you need to set a regular date with your budget throughout the month. Regularly checking your budget ensures it still aligns with your goals and where you’re at financially. You may also set up a check in that takes place once a month or every two months to review your budget and see what expenses are still relevant to your life or if you should no longer be budgeting for them.

For example, say you moved and your new place runs completely on electricity, you no longer need to have a “gas” category in your budget.

5. You don’t budget in a safety net

Have you ever been totally on track with your budget, within your spending and everything, only to have it blow up in your face? I have. It’s because I didn’t budget in a safety net or a buffer. Because life happens and lots of unexpected things in life happen.

Things you can’t plan for or anticipate. Which means they can’t be categorized in your budget. Which is why you need a buffer or safety net. Because not all unexpected expenses are emergencies. So you don’t go raiding your emergency fund for every little thing.

How to fix it

To keep your budget from imploding from an unexpected expense, make sure you’re including a buffer in your budget. This doesn’t have to be a ton of money, the idea is that the buffer builds up overtime to cover any number of unexpected expenses or just unexpected opportunities. It could be a friend from out of town unexpectedly showed up in town and you want to go out meet them, but it’s not in budget, it could come from your buffer. A buffer provides you flexibility to deal with the unexpected.

6. You don’t have an emergency fund and an emergency happened

Let’s say your budget is on track and then your car breaks down, or your dog got sick, or you had a medical emergency.

It’s going to cost you more than a buffer can handle.  Which is why you need an emergency fund. They’re  essential to financial success. They keep you from going further into debt when you’re working to pay off debt and they also give you some peace of mind. But

So yes your budget should have a line item for your buffer as well as for your emergency fund now if you have a solid emergency fund you don’t necessarily need to keep adding to it unless you end up using part of it for something. Even if you aren’t actively saving in your emergency fund, it should still be a line item in your budget that shows how much is saved, so you can add to it if necessary.

How to fix it

Start small, even just $25 per paycheck or per month can add up over time. Then look at cutting one expense, something like Netflix, and if you’re not streaming anymore maybe you can lower your internet bill too. Then use an app like Qapital to save your spare change, it will round up your purchases to the nearest dollar and set that change aside for you it all adds up. Just give your emergency fund time to grow.

Related: 6 steps to build savings

Wrapping it Up with a Bow on Top

In the end there’s lots the reasons why your budget could fail, but chances are it’s just from you not realizing how inclusive your budget needs to be. And while a budget can fail for all sorts of reasons it also means they can be fixed a number of ways.

To give yourself the best chance at budgeting successfully make sure you’re actively tracking your budget and spending, being realistic with your what your budgeting for different categories and also being sure to save for a buffer and an emergency fund to cover the unexpected.

Related: How to Budget Successfully Every Time