Six Reasons You're Failing at Budgeting

Using a budget is my #1 tip for anyone who ever asks me for any financial advice. It’s not merely a suggestion—it is absolutely essential to being successful at managing your money, getting out of debt, and getting rid of money stress and worries. Maybe you’ve tried budgeting before, but it didn’t work for you. If so, you may be making these common budgeting mistakes. In this post, I walk you through some of the reasons you may be failing at budgeting, so you can correct those errors, and begin to take control of your money. Lets’s dive in!

Using a budget is essential to being successful at managing your money, getting out of debt, and getting rid of money stress and worries.

1. You Aren’t Tracking Your Expenses

Have you ever gotten to the end of the month and wondered “Where did all my money go?” Even if you’ve made a budget, if you aren’t tracking your spending, you’ll have no way of knowing if you’re sticking to that budget, if that budget is working for you, or if you need to make adjustments to it. If you aren’t tracking your spending, you’ll never know if you’ve overspent in a particular category or how much you have left to spend in any given category.

Tracking your spending creates financial awareness and allows you to see where your money is really going.

Tracking your spending creates financial awareness and allows you to see where your money is really going. It empowers you with the knowledge of your spending habits. Do you know right now how much you spent last month on entertainment? On eating out? On shopping for clothes? Once you see where you’re spending your money, you’ll know what spending habits you can change to help you meet your financial goals.

If you haven’t ever done it, I suggest taking a look at your bank statements for the last 3 months. Look at every transaction and categorize it. Figure out, for the last 3 months, what you spent on housing, utilities, transportation, eating out, the whole nine. Are you shocked? You just might be. But, that’s ok. Now you are armed with your actual spending habits—use those habits to help guide you when you make your next budget. And when you do, start tracking every transaction. Seeing how much you’re spending in a given category can help keep you in line.

Below is an expense tracker I love, that helps you categorize all your spending. It’s available for download in my shop and even comes with blank category sheets so you can customize this tracker to your spending habits.

2. You Are Forgetting About One Time Annual Expenses

A complete budget accounts for one-time annual expenses so there are no surprises. Think of all the things you pay just once a year, and how, sometimes, just sometimes, they can totally sneak up on you. I’m looking at you annual car registration, Amazon Prime or warehouse memberships, and home owner’s dues.

Don’t forget to budget for those expenses that only occur once per year.

It’s a good idea to compile a list of those expenses that you only pay for once a year. Take some time and review your spending from last year. This is easier to do if you tracked your spending using an expense tracker like that above, but even if you didn’t, you can still review your bank statements. Once you’ve got a list of your one-time-a-year expenses, make a plan to include them in your monthly budget going forward. Take that number, divide it by 12, and save for those expenses month by month.

You can keep these funds in your checking account and manage them with a virtual envelope app like Envelopes Budget Manager. (That’s what I use!) Or, you can move them into a savings account for safe keeping until you’re ready to spend. Some bank accounts even let you have multiple sub-accounts and you can name them for your various expenses.

3. You Don’t Have an Emergency Fund

Having an emergency fund is essential to successful budgeting. In fact, it’s one of the 6 things I recommend you tackle BEFORE you even attempt to pay off debt. When you have an emergency fund in place, you won’t blow your budget when an emergency arises.

Let’s face it, if life played out perfectly according to your budgeted plan, everything would be great and you’d have no trouble sticking to your budget. But, life isn’t like that. It throws us curve balls, and it often throws them when we think we’ve planned every expense down to the last perfect penny.

At a very minimum, save up $1,000 in a mini-emergency fund before you begin attacking your debt. But, I’d even go so far as to recommend you save up a month’s worth of expenses. Yes, it may take some time. But, $1,000 won’t get you very far in any crisis. Often times, it’s not enough to cover a monthly mortgage or rent payment, let alone anything else.

Whatever amount you decide on, make sure you save it up BEFORE you begin paying off debt. It will be the difference between an emergency being a catastrophe or a minor inconvenience.

4. You Aren’t Using Sinking Funds

A sinking fund is a way to save up a big chunk of money by setting aside a little bit at a time, over an extended period of time.

It’s a way of saving up for expected, yet unknown, expenses.

For example, you know you’re going to need to replace the tires on your car at some point, you just don’t know when, or how much it’ll be. You know you’re going to have medical and dental costs throughout the year; the question is just when and how much?

With a sinking fund in place, you’ll have the money available to pay for those irregular expenses when they occur, without stress or worry.

For example, each payday, I put $100 away for medical and dental expenses. When the whole family came down with strep throat last year, those co-pays and prescriptions were easy to pay for, because the money was sitting right there, in my medical/dental sinking fund.

What I love about using sinking funds is that they protect your emergency fund. Without a sinking fund, when the whole family comes down with strep, you might have to dip into your emergency fund. What about for car repairs? Or a broken dishwasher that needs to be replaced? With sinking funds in place, your emergency fund stays fully in tact for those really unexpected emergencies.

I personally use sinking funds for car maintenance, HOA dues, medical/dental, Christmas, birthdays/gifts. For a list of 16 sinking funds to consider to keep your budget in tip top shape, including how to manage your sinking funds, see this post.

RELATED: Five Sinking Funds Every Budget Should Have

5. You Aren’t Budgeting “Fun Money”

One reason people often fail at budgeting is that they are too restrictive with their money. They are so hyper-focused on meeting their financial goals, they don’t allow themselves to have some fun with money. And because they are restricting themselves so much, they end up going to Target and dropping $300 on stuff they don’t need and blow the whole budget.

Don’t forget to budget money for some fun!

Fun money is money you can spend on anything you want—a new candle, some new pajamas, a coffee with friends, whatever. Having a little wiggle room to be able to spend some money on something you want every once in a while allows you stay committed to the budget—get yourself something fun, and not blow the budget.

I budget $40/week for fun money, which may be more than most. Sometimes I don’t spend any, sometimes I save it up for something epic like theater tickets, and sometimes, (more often than not), I end up using it for eating out. It allows me to have some fun without completely derailing the budget. And if you want to get better at budgeting, definitely add some fun money to your next budget.

RELATED: The Budgeting Method That Changed My Life

6. You Aren’t Allowing Yourself to be a Beginner

Maybe you aren’t failing at budgeting at all. Maybe you’re actually just a 100% normal human being.

And if you are a 100% normal human being you may know that you aren’t perfect the very first time you try anything. Remember the first time you tried to tie your shoes or write your name? You were probably pretty horrible at it. And that’s ok. All you needed was some practice and some loving encouragement. And look at you now! All tying your shoes and writing your name like a total rock star.

The same is true with budgeting. If you are just starting out, let yourself be a beginner. Keep trying. After you’ve been doing it for years, you will be a pro. But until then, keep showing up, trying, failing, learning from those mistakes, correcting those mistakes, and trying again. You can do this. The important thing is that you just keep at it.

I’ve said it a million times, and I’ll say it one more: A zero-based budget is the #1 tool that enabled me and my husband to pay off $68K of debt last year alone. I’ve created a FREE guide that talks about the 9 proven steps we took to pay off debt faster than I ever thought possible. You can get your free copy by signing up below!

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