Have you tried budget and it just doesn’t work for you? You give up halfway through the month or at the end of the month you are over budget? Don’t give up! Today I’m sharing 12 reasons your budget isn’t working.
First, start budget!
First things first, if you are not on a written budget… get on a written budget!
Remember, budgets are NOT constricting but instead give you FREEDOM to be in control of your money, rather than your money in CONTROL OF YOU!
Whether you are an excel nerd (like myself) or prefer pen and paper, I’ve got you covered.
- Monthly Budget in Excel
- Monthly Budget in Google Sheets
- Annual Budget Template in Excel
- Budget by Paycheck Printable
- Monthly Budget Printable
1. You Don’t Give Yourself Permission To Spend
That’s right, I’m giving you permission to SPEND MONEY!
If your budget is too restricting then you will get burnt out and throw in the towel before you make any progress with your financial goals.
When I first started budgeting I felt so much guilt every time I would eat out because I felt like that money should be going towards my debt.
Then I had an aha moment, “Why don’t I budget in money for eating out?!”
This did two things for me:
- It allowed me to eat out and enjoy time with friends without feeling guilty.
- It gave me parameters for eating out so I was allowed to but not allowed to spend hundreds of dollars and go over budget.
2. You Don’t Know How Much For Each Category
Do you know how much you spend on groceries or gas each month?
The best way to know how much to budget for each category is to complete a spending analysis.
To do a spending analysis, you will go through all of your bank statements (and receipts if you pay cash) and plug all of your transactions into a spreadsheet for the last 3 or 6 months.
It sounds daunting but it is so important to know how much you are currently starting to get a baseline. The spending analysis spreadsheet template will calculate on average how much you are spending and how much to budget for each category.
3. You Haven’t Updated Your Budget To Keep Up With Inflation
Next, re-evaluate your budget.
Right now, inflation is through the roof. Groceries and gas prices alone have sky-rocketed.
If you don’t re-evaluate your budget and keep it the same as it was last year, you will quickly be in the red.
4. You Aren’t Updating Your Budget Throughout The Month
One of the many mistakes I see when my budget coaching students start budgeting is they put off entering in their transactions until the end of the month.
Don’t do this!
Entering in each and every transaction into your budget sounds like torture but it’s so important to know every penny you are spending.
I recommend entering in your transactions every couple of days, this will make it only take a few minutes. If you wait until the end of the month it will likely take over an hour and you will dread it!
Another thing entering in your purchases into your budget every couple of days does is it allows you to see throughout the month how your spending is going. If you wait until the end of the month you may have blown your grocery budget and now it’s too late. Better luck next month, right? No!
If you are keeping up with logging your purchases throughout the month in your budget you can catch early on when you are overspending.
If you have a $400 monthly grocery budget and on week 2 you see that you’ve already spent $300, then you are able to adjust, get creative… maybe do a pantry challenge and find ways to not go over your budget.
5. You Aren’t Closing Out Your Budget At The End Of The Month
At the end of the month it is very important to close out your budget.
It is very easy to see $50 or $100 left at the end of the month and just leave it in your checking account as a “buffer”.
NO! Don’t do that!
The money will get spent. Trust me. You will have a little conversation in your head saying “It’s okay that I go over or spend this money, I have a little left over from last month”
Any leftover money needs to go to whatever financial goal you are working on.
Whether that’s an extra debt payment towards building up your emergency fund or funding your Roth IRA. Even if it’s a debt payment of $2.37 towards your student loans, do it!
6. You Don’t Have a Laser Focus Plan
One of the biggest things I find with my budget coaching students is when they have extra money to put towards their financial goals they spread it out too thin.
Here’s what I mean by this:
For example, it you have an extra $200 at the end of the month, rather than putting an extra $50 towards 4 of your debts to “pay them all off faster”; put that extra $200 to ONE debt and pay minimums on the rest.
There is big debate on Debt Snowball vs Debt Avalanche and which is better.
I have two thoughts on this.
First, the best one is the one that you stick to!
Some people’s brains work better with the debt snowball because it gives them the quick win of paying off a low balance debt.
Other’s have more of a mathematical brain and see that they are paying a lot in interest and that is motivating to pay off the high interest debt first.
Second, do whichever one works for YOU!
Second, when in a recession and money is TIGHT. It may be smarter to do the debt avalanche.
I predict that we are going to see credit card interest rates go even higher than they currently are.
If you are not able to pay your credit cards in full every single month. Stop using them now.
Either way, decide which plan works for you and stick to it!
7. You Haven’t Given Your Budget Enough Time
When you first start budgeting it can be overwhelming and easy to go overbudget.
Give yourself grace. It’s not going to be perfect, especially in the beginning.
Budgeting typically takes 3-6 months to get confident with it and make progress. Most likely you will go overbudget the first couple of months and that’s totally okay!
8. Your Expenses Are Higher Than Your Income
If you have been budgeting for 6 months and still in the red each month then it’s time to do one of two things:
Cut your expenses. Some of the best categories to cut back from are:
- Eating Out
- Personal Spending Money
When cutting money it’s important to set realistic expectations with yourself, it’s going to take time.
Don’t get stressed out and say you are going to drop your grocery budget from $600 to $100 for a family of 5. That just isn’t realistic.
Cut $25 a week for a couple of weeks, once you get comfortable with that, then cut a little more and a little more until you are where you want to be.
When money gets really tight we can only cut so much from the budget.
Next, it’s time to increase your income.
You can only cut your expenses so much, at that time… make more money!
Side hustles are the best way to bring in extra income, and now there are countless ones that you can do from home, from becoming a virtual assistant to transcriber to phone customer service to freelance writing.
9. You Aren’t Being Honest With Your Budget
Just like if you cheat on a diet and you don’t lose weight you can’t blame the diet.
If you aren’t sticking to your budget, logging your purchases, cutting back on your spending. It’s not going to work.
Tough love, I know but it’s so important to be realistic with yourself on how serious you are taking your budget.
10. You Aren't Practicing Self-Discipline
I’m not one of the people that says if you cut out your Starbucks coffee you will become wealthy.
BUT… I am all about sacrificing now for a couple years so you can live an incredible life in the future.
If you don’t know my story, I’ve had my car repossessed, power turned off multiple times, student loans in default, and ate spaghetti with butter for over 2 years every night for dinner.
When I was paying off my debt, I sacrificed a lot, bare bones budget, working crazy side hustles to pay off my debt as fast as possible.
Fast forward to now, I have thousands of dollars left over at the end of the month to go towards my financial goals.
I don’t say this to brag, I say this to show you that it’s possible.
If I can do it, so can YOU!
With all that being said, sacrificing now for a short time can result in amazing financial progress.
11. You Don’t Have An Emergency Fund
Build up an emergency fund of at least one month’s worth of expenses.
Life and unexpected expenses are bound to happen and it’s important to have savings set aside when it does. Using credit cards for an emergency is just going to put you further behind with paying interest.
Keep your emergency fund in a high-yield savings account so you can earn a little bit of interest on it and it’s easily accessible when you need it.
> Best High-Yield Savings Account: CIT Bank
> Visual Motivation: One Month Ahead Savings Printable
12. You Forget About Annual Expenses
When you are going through your bank statements you will remember all your typical monthly expenses like gas, groceries, subscriptions but it’s easy to forget about the annual or semi annual expenses expenses.
Such as property taxes, car insurance twice a year, car registration, or annual life insurance.
If you forget about these expenses it can completely blow that month’s budget.
The best way to make sure annual expenses don’t blow your budget is to keep track of those annual expenses (download free printable below) and to save for them throughout the year with a sinking fund.
More ways to save!
- Ladder: Get a quick, free quote on term life insurance, affordable, online term life insurance. No exam! No waiting! No hassles!
- GetUpside: Earn 35 cents per gallon on gas cash back when you download the app and use code FIAB20.
- Fetch Rewards is a free grocery savings app that rewards you just for snapping pictures of your receipts. That’s it. Really. Free gift cards on groceries on thousands of products every day, no matter where you get your groceries. Just scan your receipts and get gift cards from retailers like Amazon, Target, Ulta, Applebees. Use code QHKBH to earn 2,000 points ($2)!
- GoodRx: Free app that provides you savings of up to 80% on your prescriptions (even if you don’t have insurance). $5 sign up bonus!
- Rakuten: Get cash back on online purchases and automatic coupons and savings with their browser plugin… and remember, you have to make a $20 purchase to get your $20 for free!
- Blooom: FREE 401(k) or IRA analyzer, Let the experts take a peek at your retirement account. Get real advice on how it’s doing and how it could be performing better.
- Lively: A modern health savings account. Prepare for tomorrow by making smart decisions about finances and healthcare today. Lively HSAs are free for individuals and families, so you never have to worry about hidden costs.
- CIT Bank: BEST High-yield savings account, your bank shouldn’t be charging you money, instead, YOU should be making money off your money!
- Build Wealth by Investing in Index Funds Course: I’ve teamed up with my friend Jeremy from Personal Finance Club to teach you everything you need to know to invest in index funds! How to open an account, how much to invest, and how to choose an index fund. You’ll gain the knowledge and confidence to optimally invest and build wealth for decades.
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