Financial self-help is a booming field; hundreds upon hundreds of books, shows, podcasts, etc. are geared towards alleviating the financial strains and pressures of Americans, encompassing all social and economic categories. Although the advice and direction given has tremendous depth and breadth, it’s hard to make it through just about any financial self-help book or program without encountering a budget.
But when most people hear ‘budget’, they either internally cringe or get a metaphorical ‘bad taste in their mouth’, because as important as they are to financial plans (particularly in the early stages), budgets are prone to user failure. Or if they are used ‘successfully’ for a while, the experience of consistently following a budget is so taxing and unpleasant, people give out. Included in the following are these and other reasons why budgets fail, and what to do about it (remedies in italics):
- Unrealistic Expectations: Expecting long-standing poor habits to change on a dime just because they ‘should’ according to the new budget (eating out excessively, for instance) is a recipe for disaster. Along with this is expecting to stay perfectly within the budget every month. These changes are positive intentions, but improving slowly over time is a much more favorable option than biting off too much. If you can pull off those monumental changes, and feel ready for that, than go for it, but have a plan in place for what to do if things go south.
- Unexpected Expenses (and types of expenses): I remember reading a blog where a guy had gotten derailed from his previously effective budget because he got an accidental parking ticket in an unfamiliar city, and didn’t have a category for that. Another comes to mind of a mother who thanks to unseasonably high temperatures, had nearly half of a grocery trip go bad in her car. To quote Dave Ramsey, there needs to be a ‘slush fund’, some kind of back-up or emergency reservoir. There is no way to have categories for all possible drains.
- Ineffective Tracking Methods: Hitting on the ‘taxing and unpleasant’ comment from the introduction, if monitoring and reporting to the budget is so time-consuming, tedious, or simply frustrating, it will fail. Period. This is where individualization is key; remember that you have your own way of doing things. Rather than automatically following a script from a book, come up with a way that resonates with you and whoever else is participating. Allow yourself to personally tailor whatever materials being used to your needs.