Does the word “budget” make you groan? If you’re like most people, you’ve probably created budget after budget only to see them fail time after time?
Why do budgets fail to work? How can you build “success strategies” into your budget process? Here’s a snapshot look at four reasons budgets fail and what you can do to turn your budgeting snafus into budgeting success.
Reason # 1: Unrealistic Projections
If you’re determined to make a budget work then you’ve got to be realistic. You’ve got to be honest with yourself as a first step. Are you really willing to give up certain items like dining out or buying the latest DVD movie? It might be more realistic to cut back on the amount you spend rather than to attempt totally removing these kinds of expenses from your budget plan.
Solution: Reduce the amount you spend on these items rather than trying to totally eliminate these small luxuries.
Reason #2: No Written Plan
It’s often said that if you fail to plan, then you plan to fail. A written budget will not only help you keep on track but also help you to evaluate where and when your budget needs to be revised.
Solution: Start a written plan for each month. Know that budgets are fluid. At the end of three months, evaluate how well your budget worked or what adjustments are needed.
Reason #3: Forgotten Items
Gifts for birthdays, graduations, weddings, showers are some of the big items which don’t make the budgeting list but which will also throw a budget into chaos. Other forgotten items include car insurance, professional association or club dues, subscriptions, internet fees, and other kinds of expenses which show up only periodically or annually.
Solution: Pull out the calendar and list what kinds of special occasions will be coming up in at least the next three to six months. Set a price range for gift purchases rather than shopping impulsively. Take annual costs such dues, subscriptions, fees, and car insurance and divide out by 12 months. Keep a running tally of all annual costs and check periodically as costs go up or down for each item.
Building and following a budget is not a matter of restriction but instead gives you complete control over how you will choose to spend your money. Creating a budget is one step toward creating financial freedom.