I use a budget for our everyday lives, mainly to check that we are staying on track and are meeting our goals. Most of the time, I am very rigid and thorough with our budget; only occasionally do I slack with the inputting of numbers and reviewing as the year goes along.
But, there are a lot of people who struggle with budgeting. They start with the best of intentions, working out the different sections of their budget, what money should be allocated to which section and then set out on their new journey. It feels quite exciting at first, like they are finally in control of their own finances, but come the end of the month, something has gone horribly wrong.
We have all been there. You get to the end of the month and you have no money. Suddenly the bank account that was looking alright-ish is not at all. What has gone wrong? Your budgeting has.
There are three mains reasons why people struggle with budgeting:
1. Outgoings exceed incomings. This one is an obvious one as to why someone would struggle to balance the books, and needs looking at immediately. For every month you continue down this path, the more debt you add to the pot. Then begins to horrible cycle of not enough money which becomes increasingly difficult to break. If this is why you struggle with budgeting, then stop, sit down and work out why your outgoings exceed your income each month. This probably deserves a post by itself, but you need to make sure the amount of money coming in covers the basics, then add on where necessary.
2. Their budget is too tight. If your budget is so tight then there’s about a 5pence difference between income and outgoings, you will struggle, for the simple reason that if one single thing doesn’t go to plan, you will be in trouble. There is about a £100 difference in our budget, so that if something unexpected crops up, we have the funds to deal with it. If your budget is so tight there’s no breathing room, then re-assess just what needs to be in there.
3. They are no honest with what they spend. This is a big one, and often the hardest to work in, as it means being totally transparent with your spending. There is no point having a budget which doesn’t factor in all those miscellaneous spends, as we all know they add up! Some budgets have a “fun” spending category. All of our finances are combined, so our misc. fund is those little additional extras which don’t really belong anywhere else. This only works because both me and my husband are totally transparent with our spending, and if there needs to be a bigger spend for whatever reason, we discuss it first.
I’m not going to lie; budgeting can be hard. It can be a drain, especially having to remember all the numbers and thinking about the different sections and what should go where. But, budgeting, in my opinion, is a key factor in financial success. If you know how much is coming in each month, how much goes out and on what, then you can work your goals around that, and tweak your spending so that you can reach your goals even faster. Knowledge is also key; you need to know your budget inside and out if it is going to work!
Willpower is also key. Do you really need that new handbag/shoes/football shirt (insert whatever else here) that costs £XYZ? 9 times out of 10, probably not. Exercising willpower when spending is also key to a successful budget. Easier said than done though! But, as we are aiming for a more simple life, the consumerism side of things should be diminishing, so this should get easier over time.
Do you struggle with budgeting? What do you find hard?
I do have some struggles with budgeting. I find it hard to stick to my budget and tend to get some money from my savings to cover what I need to buy. For me, having a too tight budget is the main reason why I really struggle.
Can you add any more flexibility to your budget so that you don’t find it such a struggle?
I remember how my folks used to have envelopes for everything and would add the required cash to it. So grocery had an allotment and only that much was used.
That was a long time ago. But i do think plastic has attributed to it a bit. Since we never see actual money, we don’t have a physical sense of it. As compared to the time when you got your pay in cash in your hand. You could touch and feel it and also have an idea of how far it would go!
Using a debit card with allocated budget for shopping is a good way to keep things in control.
thanks for tackling a difficult topic..
I love the idea of envelopes for each section of a budget – I bet that made it much more real in terms of how much money you were spending on certain things.
People struggle with a budget most often because they don’t want to see how much money they do or don’t have. It’s more work added to an already busy schedule and some people fear budgeting is difficult when infact it’s dead easy to do. We wouldn’t be debt free including our mortgage today without the help of our budget spreadsheet.
I can’t understand how people do not know how much money they earn/have coming in each month. I cannot imagine not having some kind of budget.
Budgets are challenging because there is this sense of restriction, kind of like dieting. What has to take place is a fundamental shift in how we think of money and how it flows in our lives. If you approach a budget with the mindset that you are being denied something you deserve, how realistic is it to think you will stick with it?
I think budgets are a “tactical” tool, but require a deeper understanding of ones own personal “strategy” to make the tool work.
Taking time to look at number three on your list for a month or two before budgeting would probably go a long way towards making a budget successful. Tracking spending and then looking at the numbers and deciding which spending category is actually adding value to your life and which is not greatly enhances the desire to want to reduce spending without feeling restricted.
I like your comparison to a diet, where people are normally good to begin with, but then when the going gets tough, they give up. I guess if you think you are being denied something, then you wouldn’t’ stick to it at all. I agree with the shift that has to take place in order to understand and appreciate when having a budget can do for you.
People can struggle with budgeting because we’re lazy! Budgeting can feel like a chore but just like going to the gym, you need to change your attitude towards it and build habits around it. The only way budgeting can work is if you make it a part of your lifestyle, just something that you do naturally. If you moan and groan about it each time, you’ll eventually just stop doing it altogether.
Why do you think that budgeting feels like a chore to people? I agree with the habit; it just needs to be incorporated into the day somehow.
I agree with you that willpower is probably the leading factor in budgeting/saving success. For me it’s really all about disciplining myself not to buy stuff I don’t need, which is much easier said than done!
Very much easier said than done!
That’s the trick right there … outgoing versus incoming. It’s a delicate balance that can be hard to achieve if something unexpected comes up. We are hoping to build our emergency fund so those unexpected’s don’t throw the budget off for months.
It is a delicate balance. We’ve found it this month with more car problems that have stretched our budget.