Overcome Budgeting Challenges: 5 Reasons Why You’re Falling Behind

I follow a very successful financial influencer and I am fond of budgeting strategies. But lately I have not been able to keep up with my budget and that’s driving me crazy. I did everything in my power to stick to the budget and I cannot understand why my expenses keep on going up and up and up. – Jones 36 yr IT professional from Ney Jersey

“I stick to the budgeting and avoid plans which make me go overboard but whenever I avoid spurge, every time something comes up to disrupt my plans” – Akash 26 from Texas

“I cannot budget. I just cannot write it down to last penny I own. Despite all the pen and paper, gazillion apps, tracker I just cannot keep the habit and of course overspend”—April 30 Yrs. from SF Bay area

Does this sound like you? If yes, you are not alone. 85% of millennials and GenZ cannot keep up with their budget and it has nothing to do with your spending habits, or only you cannot do it and others can. It’s a systemic problem and hold I will explain it to you.

So why can’t you stick to your budget despite having lot of applications to track your expenses, a lot of online challenges like “No Spend Weekend” or “No spend Month” and so on. You might want to think about your ecosystem and this article may help you. So, read along

Why can’t you budget

There might be multiple legitimate reasons to budget slip and that depends on your social status, income, liabilities etc. Let’s think if you have any one these.

You take rules seriously

Internet is filled with numerical guidelines like 50/30/20 rule for spend. 50% goes to your needs,30% wants and 20% save. Now this rule might present a guideline this one shoe does not fit all. A person earning 3000$ per month might have to spend more than 50% for fulfilling his/her basic needs which leaves very little room for wants and saving. On the other hand, a person with 10k$ per month might not need 50% of his/her paycheck for needs and have more room for wants and saving. So, the rules are not meant for all, and you should make one for yourself following guideline. But remember, your save and invest money always takes a preference.

You don’t save or invest first

When you get a paycheck, and you immediately save it to your other bank account or invest somewhere you get a sense of relief, and your mind is tricked to think you have enough. So, in first few months you might spend over your budget because you have already saved but after few months when your investment portfolio is bigger your tendency to save more increases. When you have money lying around or growing you feel like in control and tempted to save more. So always save first and spend later

You do not have emergency fund

You might wonder what’s emergency fund has to do with budgeting. But budgeting like everything else is a psychological game. Just like saving and investing put some money every month for emergency fund. According to experts you should have 6 months of emergency fund lying in your bank or liquid mutual fund or gold. Your emergency fund should be liquid i.e. You can exchange your assets for cash in quick time ex. Gold. Real estate though an asset is not liquid. If you have emergency fund for one year, it again gives you mental strength and motivation to save more.

You have strict budget

The very first thing you do when you start budgeting is being over ambitious with your savings. What does it mean anyway?  From the very first month you want to be successful in your challenge and avoid any failures. You do not allow yourself room for mistake. Budgeting is like diet, when you have a cheat meal you turn it to cheat day and then you feel guilty and again do the same thing and finally give it up.

Ex. Your monthly salary is 5000$ and you have identified your living expenses like. 1500$ rent, 400$ grocery, 500$ utilities (Gas, Electricity, mobile etc.). Remember these are your breathing expenses and not that anything you want to buy or enjoy outside. Now if your grocery bill crosses 400$ mark you panic and think like failure. Now in this feeling you end up ordering something which further makes your budget go haywire. You need to step back and think

1. Is X amount enough for my grocery. Does it leave room for some occasional indulgence. In at first if you think your budget is 400$ keep aside 450$. This way if you spend a little more you are not beating yourself up.
2. Does your budget account for any unexpected expenses. For ex. Your car broke down or your kitchen needs immediate plumbing. If not, then you should always keep aside money every month for this. Not every month but once in 2-3 months you will encounter such issues.
3. Does you budget include money for gifts and occasional dine-outs

If you have sudden invitation and you need to gift something. Or you or your partner both are exhausted and want to order in or dine out. Does your budget allow that.

Your income is not fixed but your budget is

Are you a freelancer or small business owner? In this case your income may depend upon seasons, holiday time and many other factors. So, your income is not fixed but your expenses are. So, it’s very common to spend less or more. In such scenario expecting you expenses or saving to be consistent will only just add to anxiety. If you are someone with variable income, try reducing/increasing your expenses with you expected income.

So, what can you do

Do not stress over maintaining it to the last penny

Budgeting like healthy habits is prone to disruption and needs patience and time to adapt to. You may want to give up in a month or two but keep doing it. Simply write down your expenses once a day or in 2-3 days and for first few months observe where your money is going. After initial trial period you will get hang of it and becomes habitual.

For starters just list your major expenses in first month and observe.

Next month you can find loopholes what you consider a major expense and try to categorize it cut down. And so on. This incremental approach feels like a progress, and you tend to do it.

Save first

I cannot stress on this enough but do save first. Once you see money in account your saving tendency increases. That’s the reason billionaires still strive to make more money even though they don’t need it.

Do not skip small happy moments

You might have to give up on your kids demands though they are not aligned or but a small present for your spouse.  If you feel like you cannot even afford to buy a nice dinner for yourself what’s the point. Remember in the long run these happy moments are crucial than monetary saving.

You can draft your monthly expenses like this

At the start of each month jot down your approximate expenses like this and you will get a view where your money is going and where can u reduce it.

Conclusion:

Just like there is no one size fits all, budgeting is different for all. It depends on your age, sex, financial situation, liabilities, city you are living in, marital status. Everything matters and you are not alone in this. And most of all it needs discipline and patience. So just take a step forward and keep on doing it.