If you have ever struggled to make ends meet each month, you know the importance of having a good budget.
But if you are like me, you have tried countless times to stick to a budget without much luck. Sometimes the budget failed because you lost track of how much you spent. Other times, it was because you had to go to your friend’s wedding or some other unplanned event. Or because you were slammed at work and couldn’t be bothered with it. The list goes on.
I’ve certainly been there.
But I think there’s a path forward. We have compiled the following list of the 10 biggest reasons why budgets fail:
- You lose motivation
- You get busy
- You fail to be realistic with your budget
- Your bills are too high
- You forget expenses
- Emergencies happen
- You give in to temptation
- Everyone is not on board
- You fail to make adjustments
- You give up too early
Why is this important? Because to fix the problem, we need to know why things go wrong.
Of course, we then analyze each problem and offer you solid, practical ways to fix them.
Let’s get started!
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10 Biggest Reasons Why Budgets Fail
1. You Lose Motivation
A common reason why budgets fail is that people start losing interest in them. They may try budgeting for a couple of months, but don’t see great results. Or they get tired of tracking their expenses day after day.
A lot of people lose motivation because they don’t like the constant limits on their spending.
These situations are common (and understandable), but there is a solution.
How to Fix It
At a general level, the best way to sustain motivation is to have a goal or target that you want to achieve by budgeting. Let’s say you want to save for a down payment on a house.
That’s a powerful and clear goal.
If you continue to focus on that goal, you can shake off the occasional ebbs in motivation that come your way. Imagine yourself achieving that goal and get pumped about how it can improve your life.
A lot of people pay all their bills each month but have nothing left over for savings. Talk about demotivating. Paying yourself first solves that. You just take a certain amount that you want to save and stash it away in a separate account so that it is not available to spend.
If you want to learn how you can pay yourself first, including the best ways to do it (some of which may surprise you), check out my article on the topic here.
Finally, you can sustain motivation by giving yourself small rewards for success. If you’ve successfully hit your budget for the month, treat yourself to something that will keep you going. It’s a small price to pay for feeding your will to continue.
2. You Get Busy
Everybody gets busy. That means that your budgeting can sometimes take a back seat to other priorities in life.
When that happens it is easy to abandon your budget altogether. Here’s how to avoid that.
How to Fix It
It’s easy to prevent your budget from failing because you get too busy.
In other words, let someone else (or in this case, something else) do the heavy lifting for you. There are a lot of websites and apps that can help you do this. Mint is a leader in this space. They have a slick app that connects to all your financial accounts and keeps track of your spending.
It also tracks your bills and gives you alerts so can you pay them on time. Finally, it has a budgeting application that helps you create a realistic budget based on your spending habits. You can then use their “daily budget tracker” to see how your current spending affects how much money you will have at the end of the month.
It’s a great way to know exactly where you stand with your budget at any time. So even if your life gets busy, you can rest assured that your budget won’t be neglected.
Of course, if Mint doesn’t work for you, I would encourage you to find another tool that’s a better fit. The point is to find something that will keep you on track when you don’t have the time to do it yourself.
3. You Fail to Be Realistic With Your Budget
Let’s say you are sitting down and creating your budget for the month.
Brimming with enthusiasm, you can’t wait to start gaining control of your finances. No more needless expenses! You mercilessly cut away any fat from your budget. Your clothing budget is zero, money for anything fun is banned. No more eating out ever.
Of course, you know how this story ends. By the end of the second week, your budget is completely blown.
You cannot operate on an unrealistic budget. But people set up unrealistic budgets all the time and are disappointed when reality sets in. Here’s how to avoid that.
How to Fix It
First, you need a realistic view of your spending. The only way to do that is to look back at your actual spending over time (at least two or three months).
Based on that grounded view, figure out what you can reasonably cut. Avoid the temptation to go overboard. Do not cut anything more than 10% at first – see how it goes.
You may want to cut deeper than that or even cut everything out of a certain category if you see it as frivolous. Don’t. You can always choose not to spend on it and have a buffer for the month.
And remember to budget for fun stuff too. Complete austerity is not sustainable – you are in it for the long-haul!
4. Your Bills Are Too High
Another common reason why budgets fail is that the bills are simply too high. You may focus on trying to cut day to day expenses to make ends meet. But the real problem is sometimes the fixed costs, not the discretionary stuff.
When your bills make up too big a portion of your overall expenses, your budget will suffer because you have no choice but to cut back drastically in other areas. But remember what we just covered about the dangers of doing that? So, how do we solve this problem?
How to Fix It
The first thing you need to do is figure out why your fixed bills are so high. Is it because of high-interest credit card debt? Student loans? Rent? Mortgage?
Depending on the reason, you have to develop a plan to reduce those fixed costs over time. Credit cards can be a killer here. But there are methodical ways to tackle them. Check out my article here to learn some well-established strategies for eliminating credit card debt.
If student loans are the problem, consider refinancing with SoFi, a market leader in the space
Full Disclosure: You will get $10 just for checking out their offer (no hit to your credit either). I will get $10 too. If you refinance your student loan with them, you (and I) will both get an extra $300! Sounds like a win-win to me.
Finally, if you want to look at lowering your bills overall, you may want to check out LowerMyBills.com. They are a premier, free, online service for consumers to compare low rates on monthly bills and reduce the cost of living. If you are interested in learning more, just check them out here.
5. You Forget Expenses
Ok – you have come up with the perfect budget for this month. It is realistic and covers every possible expense. Every dollar is perfectly pointed toward its intended purpose. But then midway through, you realize your mom’s birthday is this month. Or your annual car insurance payment is due.
And the wheels start to come off your budget…
Let’s not let this happen.
How to Fix It
Irregular expenses can be the downfall of an otherwise well-planned budget. Some of the big culprits are annual insurance payments and property taxes. Dedicate some of your monthly budget to cover them. Just divide the total cost by 12 to figure out how much you need to set aside each month.
But you shouldn’t forget about seasonal irregularities either. Utilities are the perfect example. In winter, your gas bill could be 2-3 times higher due to heating costs. By contrast, in the summer, your electric bill could be 2-3 times higher due to AC costs.
Use a similar strategy here. Figure out the total that you paid last year for each utility and divide by 12 for your monthly budget on these expenses.
Let’s not forget about the holidays and birthdays. I like to set aside a portion of the budget to a gift fund that covers all of these types of expenses.
6. Emergencies Happen
Irregular expenses can trip you up, but they are not unexpected. You may overlook them, but you can’t claim to be surprised when they come due.
Emergencies are different. They hit you out of the blue.
The truth is though, you know they are going to happen too. You just don’t know when. Cars break, people get sick, roofs leak – it’s part of life.
But not being prepared for emergencies can wreak havoc on your budget. Here’s how to avoid that.
How to Fix It
The solution here is obvious. Get an emergency fund in place asap. It should be a priority if you don’t already have one.
Your budget will have far more staying power if you can smoothly cover these unexpected expenses out of your emergency fund.
It can be as simple as setting aside some money into a high-yield savings account.
But if you are looking for some unconventional ways to set up your emergency fund, check out my article on the topic. You will learn how to get safe and secure access to your money, but with benefits that you won’t get from a traditional savings account.
7. You Give In to Temptation
One of the sure-fire ways to demolish your budget is to go on a shopping spree for your favorite item. Whether it’s clothes, shoes, fine dining, or even cars (yikes!), everyone has their weakness when it comes to spending.
How to Fix It
The best way to avoid spending on these types of items is to avoid exposure to them. Don’t put yourself in a situation where you will face temptation. And if you find yourself in that situation – run.
Just kidding, you can coolly walk away. But the point is remove yourself from the temptation. Another tip is to wait before buying the item. Wait 24 hours.
Once you have stepped away from the heat of the moment, you will have a chance to cool down and consider whether that purchase makes sense. Most times, you will find it pretty easy to let that item go from your mind.
If you find yourself consumed with buying items in a particular area of interest, try to find a different (less expensive) area of interest and immerse yourself in that. It can be a fun project to find cool and interesting things to do (and you can save money to boot).
8. Everyone Is Not On Board
You may be pumped about your new budget, but your significant other may think you are nuts. Not being on the same page when it comes to your budget can sink that budget before it has a chance to take hold.
How to Fix It
The best way to get the other person to buy into your budget is to find a shared goal.
Remember we talked about motivation earlier? You need to make sure your partner is motivated too. Define a shared goal (buying a house, going on a dream vacation, saving for a kid’s education, etc.), and make sure your budget is aligned with that goal.
Finally, do regular check-ups with your partner to make sure you both are still aligned and on track. Make adjustments as needed – remember long-term sustainability is the goal.
Speaking of adjustments, let’s move to the next topic.
9. You Fail To Make Adjustments
Sometimes you get so fixated on your budget and robotically sticking to it that you don’t realize that it needs adjusting. When it fails, you think that you just need to try harder.
But any static plan (no matter how good) is not going to cover everything that life throws at it. You need to be able to adjust on the fly to create a budget that works long-term.
How to Fix It
The first step is to evaluate what went wrong in the budget. Did you overspend in a category? Did you forget about an expense? Did your income drop? Any of these issues can require a change to your budget.
Figure out what went wrong and come up with the right plan to ensure it does not happen again. It’s not hard – but it does require action on your part.
Don’t let an outdated or broken budget derail your financial success. Take the time to make necessary adjustments each month.
10. You Give Up Too Early
As you can see, a lot of things can go wrong with your budget. Many people give up when they hit that first roadblock.
But that won’t happen to you because you know the 10 biggest roadblocks and how to fix them.
How to Fix It
So don’t give up early. Take failures in stride. Adjust as they happen and make improvements each month. You are getting closer to a working budget each time you do so.
And remember, failure is a normal part of the process. Everyone who has a successful, long-standing budget has had to overcome failures along the way.
So those are the 10 biggest reasons why budgets fail and how you can overcome each of them.
I hope you find these tips helpful to your budgeting process. It’s not always easy following a budget, but if you stick to it, you can find yourself achieving your goals in no time.