So, the budget doesn’t seem to be happening for you each month? Can’t figure out how to do budgets that work? Well, take heart. At least you are trying. That’s more than can be said for a good portion of the human race who just make excuses for why they don’t want to attempt one.
If you are having trouble, that’s OK. Budget success doesn’t happen overnight. It took my wife and I six months of making adjustments and having emergency budget meetings before ours began to settle down and become consistently stable from month to month.
Budgets That Work
This I know with complete surety, developing a quality budget changed our life. But it wasn’t without some missteps along the way. In those early days, I found these four things wrecked our budget every month.
1. We left items out of our budget
Each month we would forget some expenditure. The kids back to school fees. A haircut for my wife. The car insurance payment that comes twice a year. These and what seemed like a hundred other things kept creeping up on us “unexpectedly” (we should have known) and wiping out our budget plan for that month.
So in order to do budgets that work you have to be thinking about what is coming down the road. We had to take out our bills and our calendars and plan ahead for when certain items would be due. We inserted notes into our budget spreadsheets so that we wouldn’t forget those same items in coming years. And we forced ourselves to communicate more as a couple so all ideas about what was coming up that month were on the table.
This helped eliminate the surprises – the “gotcha” moments from month to month. But, speaking of spreadsheets…
2. We made our budget too complicated
Those first budget spreadsheets were a disaster. We created an exorbitant amount of categories, too many to efficiently keep track of. When we realized the amount of time it was taking to properly input all our expenditures, we knew something needed to change. So we streamlined some smaller categories into larger ones, which reduced the amount of time we spent figuring out where things went.
Sometimes less is more. Just make sure budget clarity is maintained. Don’t reduce expenses into too few categories. There’s a danger to going in the other extreme as you won’t get a clear picture of where the money is going.
Reducing the complexity helped a bit but not enough because…
3. We didn’t live on our budget
That doesn’t seem to make sense. Why invest the time in making a budget if you are not going to follow it? But I found that is exactly what we did for the first few months. We created one but didn’t follow through with its application in our daily lives. Our attitude was “Haha…we made a budget. Wasn’t that cute. Now let’s just go spend how we want to.”
Living with this attitude will only bring frustration and disillusionment with the entire budget process. You will eventually quit trying unless you develop the discipline to say, “No, it’s not in the budget” then stick to it with your decisions. This requires intense training, especially for free-wheeling spenders like myself. Because what also happened was…
4. We gave in to “Pretend Murphy”
Murphy’s Law states that anything that can go wrong will go wrong. The day you can’t be late for work the engine doesn’t turn over in your car. These are bound to happen, as emergencies are a part of life. That’s why there is great value in creating adequate savings to pay for emergencies so Murphy doesn’t disrupt the monthly budget or hinder the debt payoff plan.
Our problem wasn’t always Murphy…it was mostly his cousin, Pretend Murphy. He’s a rationalizer. Someone who made us think things were emergencies when they really weren’t. For instance, he popped up often on Friday nights when our friends unexpectedly called and wanted to get a pizza. He reared his head once in incredible deal we (I) found on a plasma TV. And who could forget those mountain bikes we just “had to get.”
This one area probably tripped us up more than anything else. Creating false emergencies consistently ruined our budget plans.
Budgets are personal finance game-changers. When done properly they can alter your life. The process will take some time to figure out and there might be some holes like these to patch up. So don’t give up if you are experiencing some setbacks. That’s just part of creating an effective budget.
Questions: How have you put together budgets that work? What other reasons have you experienced that resulted in your budget being ineffective? What have you claimed was an emergency but really wasn’t?
Prior Post: Even Jesus Had a Side Hustle?