Applying a budget to real life is sometimes difficult. There is endless information available on the benefits of budgets and how to create one, but the advice on making it all work in real life seems to be limited. Knowing what makes budgets fail will give you the advantage you need to make yours work.
Let’s look at the main reasons most people fail to make budgets work:
- Unrealistic Goals
- Quitting Too Soon
- Misunderstanding What a Budget Is
Let’s Be Real
Too often we set ourselves up for failure with unrealistic goals. This may be a result of juggling expenses in our budget to make the income equal the expenses. But if that target is just a guess, it is probably the wrong number. We find out the hard way when there is a week left to go in the month and we have already spent our budget of $200 for groceries.
This means we set up the target and we missed it. That does not mean our budget will not work. It just means we need to set a more realistic target. This is no time to quit. Rather, it is an opportunity to make adjustments and keep moving toward our goal of having control of our finances.
Do Not Be a Quitter
You have put a lot of time and effort into the creation of your budget. You have worked hard in maintaining the tracking of your income and the money you are spending. Months have gone by and yet you still seem to get to the end of your money before the end of the month. Do not let your frustration tempt you into giving up. It would be the wrong thing to do.
If you were driving to Disney World and half way there realized that you had made a wrong turn, driving 50 miles off your planned route, what would you do? Would you quit and go home? Of course not. So why should we give up on a budget just because everything does not work perfectly the first few months? Do the same thing you would do on your vacation. Look at your map and adjust your route to find the best way to reach your destination. Make the adjustment and move forward.
No Torture Here
Too many people think that a budget is something to keep them from spending money, and that is wrong. It is not a straight jacket. A budget is a tool to provide you with information to manage your finances. The knowledge you gain by tracking income and expenses will help you get the most for your money. In fact, a budget can help find money that you can spend where it will give you the most enjoyment.
Successful Solutions
Fortunately, all three problems can be corrected with the same answer: Use the budget as a management tool. Each month your budget will show what you planned and actually earned and spent. That’s valuable information. The trick is to see where the actual number was significantly off the expected number.
Once you have found a big difference you can begin to analyze why it happened. Was there a big one-time expense this month? Maybe you committed the first mistake and just guessed at what you would spend. It also could be that you have been spending carelessly on groceries. If that is the case, you would look to find some savings this month.
Each month work on the biggest differences until the whole process runs smoothly. Just take on one or two at a time. Each month you should get closer to actually having control over your finances. After awhile, it is just a matter of checking to make sure that everything is roughly on target and making minor mid-course corrections.
Now that is not to say it is easy to resolve those differences, sometimes it’s not. But it’s always easier when you have some clues to help point you in the right direction. With the information that your budget provides, you know where to look for possible savings. Often that is the difference between frustration and success.
It is always a shame when you work hard and do not get any benefit from your work. Do not let that happen to your budget. It takes much less effort to fix a budget than to start one. You already have put in the hardest work. Take the time to get the benefit. You deserve it.
For more information regarding this topic or any other tax-related issue, please call Henssler Financial Tax & Accounting Division at 770-429-9166 or experts@henssler.com.
This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
