10 Reasons Why Your Budget Sucks
Was one of your new year’s resolutions to finally start budgeting? You probably started with noble but unreachable goals, like “I will save 50% of my income!” or “I will only spend P1,000 on restaurants this month!” and then proceeded to fail miserably, and now you want to give up on budgeting forever. “Budgeting sucks!”, you may think.
Not so fast. It’s not budgeting that sucks — just how you set up your budget. Making up a budget’s the easy part. Making it reasonable and sticking to it is harder. And if you’re doing one of these 10 things, then it might be why your budget sucks:
1. Your budget doesn’t match your personality
You and your budget should be compatible.
Knowing your attitude towards money is the first step to having a good budget. If you’re the kind of person who enjoys spending money, not allowing for an “anything goes” fund on your budget is why your budget sucks. If you’re a control freak, having a budget that’s too flexible is not going to work for you.
Solution: Figure out your money personality, and fix your budget to work around that. This way, the budget will fit easier into your life, and you’ll be more likely to stick to it.
2. Your budget isn’t flexible
Your income flow can change from month to month, especially if you work as a freelancer, or on commission. You might have more expenses one month, or less income the next. If you don’t build in a certain amount of flexibility into your budget to account for this, it’s going to fall apart repeatedly and you’ll find yourself giving up on your budget.
Solution: Prepare for these fluctuations by making room for it in your budget. Allocate more savings when you have more income and allow for less if your income drops. This way you won’t feel like you’re failing at your budget when times change.
3. You don’t have a contingency fund
Surprises like minor car repairs can ruin your budget.
It’s easy to budget for the constant expenses — rent, electricity, water — but you might forget to set aside some money for contingencies, like minor car repairs, or those little things that might come up that aren’t serious enough to require your emergency fund.
Solution: Budget a small amount for contingencies and let it build up so when something minor threatens to throw your budget out of whack, you’re prepared.
4. You haven’t figured out your financial priorities yet
Why are you budgeting in the first place? Are you hoping to save money for a huge expense? Do you want to get your spending in certain categories under control? Before you budget, you need to know what your financial priorities are. Otherwise, your efforts are directionless and will eventually fail.
Solution: Know what your goals are, so you and your budget have something to work towards.
5. You never update your budget
You set a budget way back in 2013, and you’ve been sticking to it. Good for you! But it’s 2015 now, and your financial situation may have changed (along with the global economy!). You may have gotten a raise. Or maybe one of your constant expenses, like your rent, has gone up. If you’re still using your old budget for your new financial situation, your budget is going to suck.
Solution: Every month, go over your budget and make the necessary adjustments. Your budget should be up to date with your actual financial situation and climate so it’s easier to maintain it.
6. You didn’t budget for savings
You didn’t think we’d forget to talk about savings, did you?
Sure, you’ve categorized all your spending, from rent to eating out to entertainment. But did you budget for savings? No matter how much (or little) you’re making, you should be putting away some of your income for the future. Otherwise, you’ll never have full control of your finances, and you’ll feel like you’re not making any progress.
Solution: Budget a certain percentage of your income for savings. If 20% is too much, start with 10% and slowly work your way up.
7. You have too many categories
You’ve got a line item for everything — restaurants, entertainment, groceries, fast food, haircuts, car washes, shoes … and the list keeps going. So if you go out for drinks, what category does that fall under? Entertainment or restaurants? And are you going to go through your groceries line by line to make sure each item you bought is properly categorized? Too many categories will make budgeting tedious.
Solution: Keep your major categories (like rent, electricity, groceries, cellphone bill), but create an “everything else” budget for, well, everything else. Shove all your non-essential spending in there and set a limit. This allows for more flexibility in your budget and lessens the work for you.
8. You’re not using the right tools
You look at your smartphone all the time. Might as well use that power for good.
Pen and paper works great for a lot of people, but for those of us who live on our phones, a budget tracking app might be more helpful in keeping you on track with your budget. It’s all up to you; if you’re using the wrong tool to budget, you’re going to fall off the wagon faster and your budget will be shot in no time.
Solution: If you’re more comfortable with pen and paper, keep a ledger for your budget. If you want all your budget information readily accessible, try using an app. Start with these 10 budgeting apps for your smartphone.
9. You forgot about non-monthly expenses
Did you make room in your budget for quarterly or annual expenses, like health insurance? If you didn’t, you could throw off your budget completely when it comes time to pay these fees — or worse, you put it on your credit card, wreck your budget and start the debt cycle all over again.
Solution: At the beginning of the year, take these non-monthly expenses and divide by 12 so you know how much to budget every month. For example, if your health insurance premium is P24,000 a year, you should budget P2,000 a month, so that when it comes time to pay, you’re not scrambling around trying to find that money — you already have it. All spending, even if it isn’t monthly, needs to be part of your plan.
10. You didn’t budget for fun
Every good budgeter deserves fun.
You don’t have to punish yourself when you make a budget. No matter your reasons for budgeting, you should always have a budget for fun. You deserve to enjoy some of the money you’re working so hard for. Besides, having a fun allowance will make it easier to stick to the rest of the budget, and you won’t see your budget as an enemy anymore.
Solution: Budget some “guilt-free spending money” for yourself every month, be it P500 or P5,000. Feel free to use this amount on whatever you want, as long as the rest of your budget is sound.
Budgets don’t have to suck. Sometimes, all you need for a budget to work for you is a little adjustment. A budget is a powerful tool that can get you on the way to personal finance success. You get a sense of power over your money, and this power will allow you to improve your financial situation. So fix your budget so it doesn’t suck!