Are you looking to fix a failing budget?
Maybe your debt repayment efforts have plateaued. Perhaps your savings are at a standstill. Maybe you’re still living paycheck to paycheck despite best efforts to get ahead. Or maybe, you’re still accumulating consumer debt despite your best efforts to stay on budget and not use credit.
Regardless of why you’re dealing with a failing budget there are ways to fix it!
If you’re dealing with a failing budget, more than one of the following is likely happening
- You’ve created an unrealistic budget that is impossible to stick to despite your steadfast effort
- You’re living beyond your means whether you know it or not
- You’re money and spending remains unaccounted for
- You’re buying what you want and not only what you need
Causes of a failing budget
Are you unrealistically attempting to save a huge portion of your take home income every month? Have you dropped your grocery budget so low that you can’t meet your goals?
Whether you’re overly ambitions with debt repayment, over your head with living costs or trying to save more than makes financial sense for you – this is reason number one why you need to fix a failing budget.
Setting realistic budgeting goals is key to any successful budget. If you’re setting goals that you can’t possibly achieve then you’re setting yourself up to fail even before you start.
Living beyond your means
Have you checked where your money is going recently?
Is that new handbag, tool or kitchen gadget really in your budget? In other words, can you realistically afford to purchase what you’re spending your hard earned money on?
More often than not, we get stuck in this mentality that we’ll buy now and pay later. This notion of putting off paying for something is easy because credit cards allow us to do just that am I right?
If you’re putting something on a credit card because you don’t have the cash flow to cover the payment right now – you’re living beyond your means. It’s as simple as that.
Your money is unaccounted for
Do you know where every single penny you are spending is going? I’m serious guys, EVERY penny.
Money that is unaccounted for is another leading cause for a budget that is failing. Withdrawing money at an ATM and spending said money without keeping track of what that money is buying is what I refer to as unaccounted for cash. That cash needs to be recorded and accounted for. If you want to get a true and realistic understanding of where your hard earned money is going you need to start keeping track.
Buying what you want not what you need
Shopping can be fun. I don’t deny that. At all.
But, shopping becomes a problem when you’re overspending and buying more frequently based on wants and not needs. Sticking to a realistic budget involves being honest about your spending and also tackling the problem of overspending on items that you want but don’t necessarily need.
Treating ourselves from time to time is great! It makes us feel better and it feels good am I right?
But, the key here is that it needs to be from time to time. We need to fit it in an established budget and NOT create financial hardship by doing it. So, if satisfying a want means putting it on a credit card to pay later or being late on your cable or internet bill then you really need to reign in those purchases because they will cause your budget to fail.
How to fix a failing budget
Creating a realistic budget that will help you gain control over your finances requires that you get real. And by real, I mean really real.
You need to face the music and be 100% honest with yourself when it comes to how much you earn, how much you spend and how much of that spending is actually necessary. From there you need to set realistic financial goals for yourself.
Rome wasn’t built in a day so paying off debt and saving a heap of money likely wont happen overnight. But, setting realistic short and long term goals will help you start living on a realistic budget and seeing those goals through.
Write it down on paper
Write it down. And, when I say write it down- I mean everything.
How much are you really earning? How much take home pay is actually deposited into your account on a weekly or bi-weekly basis?
From there start identifying your fixed expenses:
- How much do you owe in debt repayment? (minimum balances)
- How much are your fixed living costs? (Rent, mortgage, co-op fees, insurance, taxes)
- How much is your car payment and related car insurance?
- How much are you paying for health insurance?
- How much are you paying for child care?
Now, look at a recent bank statement and identify your variable expenses:
- How much did you spend on grocery last month?
- How much did you spend on cell phones, internet, cable?
- How much did you spend on fueling your vehicle?
- How much did you spend on miscellaneous purchases? (things like clothing, eating out, gifts, entertainment, pet supplies etc)
At this point I imagine many of you are left questioning where some of your money is going am I right? I’m sure that your take home income minus your total fixed and variable expenses leaves you with a number that you just don’t see sitting in your bank account.
That right there is unaccounted for spending. Usually, it comes in the from spur of the moment ATM withdrawls. You know what I’m talking about. $40 withdrawl to buy a few necessities like milk, eggs and butter and then somehow somewhere the difference was spent on something that you cannot remember and account for later.
Cut expenses where you can
Once you’ve got a solid idea of how much is coming in and how much is going out you’re ready to start making budget adjustments.
If you’re in a situation where your take home income isn’t enough to cover your fixed and variable expenses then it’s time to start cutting expenses where you can.
The cool thing about variable expenses is that they are variable – meaning you can manipulate and change them to reduce your financial commitment. Things like cable, internet, cell phones and grocery budgets can be changed, modified and altered to suit your budget. Call up your service providers and see if they would be willing to cut you a deal. I’m betting that most if not all of your providers would gladly work with you rather than lose you as a customer.
If cutting variable expenses is still not enough, then maybe you need to consider supplementing your income for a period of time to help you get back on track. Side hustling is all the rage right now and taking on a small or big side-gigs to make extra cash each month is a great way to get you back on track.
If you’re in a situation where you’re in the green and you’re fortunate to have left over income every month then why not cut back anyway? Any savings you are able to accrue by reducing your variable expenses goes straight to your savings and helps grow that nest egg even faster! Making a few simple simple changes to your lifestyle can save you even more money!
Set realistic budgeting goals
Sometimes we need to adjust our perception of goals folks. If you’re in a substantial amount of debt and are really struggling and living paycheck to paycheck it would be both unrealistic and self-defeating to set lofty goals like save 50% of take home income and reduce grocery budget to 100$ to feed a family of 6.
Goals can be short term and in some cases immediate. Make your goals achievable – otherwise you’re setting yourself up to fail and will be looking to fix a failing budget sooner rather than later.
A few examples of short-term or immediate budgeting goals
- Pay off debt quicker by picking up a side hustle to pay down the balance
- Need some extra cash right now due to an unforeseen expense? Get online and sell off some of your stuff.
- Reduce your grocery budget and funnel the money you’re saving to building an emergency fun.
- Need something? Try bartering or buying used to keep costs low.
Once you’ve been able to get yourself out of the paycheck to paycheck cycle and have been living by a realistic and attainable monthly budget – it’s time to set long term goals.
Your goals can be anything from getting out of debt to saving enough to retire early. Anything is possible folks, ANYTHING!
Progress not perfection
Like anything in life it’s unrealistic to expect that creating and living by a budget will be successful all the time. It’s about progress and not perfection folks. If you overspend, learn from it, make necessary adjustments and move on.
As long as your budget is realistic and tailored to your financial situation I promise that it’ll be easy to follow.
Don’t fall into the trap of creating a super stringent and restrictive budget. Be honest, make adjustments and scale back. But, ultimately come up with something that is livable which will only encourage you to keep going rather than falling back into the trap of needing to fix a failing budget.
Even more This Tiny Blue House posts you might enjoy
- How brewing the best cup of coffee saves you thousands
- TTBH’s super easy $1000 savings plan
- 35 legitimate side hustles you can do online
- 5 grocery shopping tips that will save you money
- 10 things you can do right now to save money
I want to hear from you!
How are you going to fix a failing budget?