Whether you’ve been at it for years or it’s your first time, common budget problems can — and do — pop up from time to time.
It can happen to anyone but thankfully, there is good news: it does not need to be a major setback!
Are you struggling with your budget? The start of a new year is a great time to really dig into ways to make your system better.
To help with that, today I wanted to talk about some common budget problems you could be facing — and what you can do to fix them!
Common budget problems (and how to fix them)
I absolutely believe if you want to get your finances on track, you need a budget.
It doesn’t need to be fancy — it can be as simple as a document in Excel or Google Sheets. It just needs to be something that works for you.
Part of making sure your budget is solid is knowing when it’s not working. Here are six common budget problems — and some ideas for how to fix them.
Problem: Your budget is aspirational
It won’t do you any good to have a budget that is not an accurate reflection of your financial situation. This means it’s important to be truthful with yourself — about your earning, about your debts and about your spending habits.
For example, spending less than $100 on groceries might be your goal — but if you’re regularly doubling that, you’re not doing yourself any favours putting $100 in the grocery line.
How to fix this common budget problem: Be honest. It’s both as simple and as complicated as that.
One thing that’s important for making this happen is to understand why having a budget is a good thing. It’s not meant to cause shame — it’s simply a tool to help you achieve your financial goals. Being honest with your budget is a great way to help you achieve that aspirational vision for your life.
Problem: Your budget is missing line items
This goes along with the first point: being honest in creating your budget also means including the necessary line items.
What good is it going to do you if you’re spending $30 a week at Starbucks but not including it in your budget? Or what about that $10 bank fee you get charged every month?
The more accurate your budget is, the more it will help you. Make sure you’re including all the necessary line items.
How to solve this common budget problem: Write out every single thing you can think of that you spend money on each month. One thing we have found that works well is to list out all the fixed expenses, like rent and car insurance, then lump together the more flexible, daily expenses (gas and groceries, for us) into a miscellaneous line. I wrote about that here. This might not work for everyone, but we have found it helpful.
Problem: Your budget is too tight
Assigning every single dollar is a popular budgeting method. There’s nothing wrong with that.
But if your budget is so tight that an unexpected bill or an emergency will throw it off entirely, it might be a good idea to revisit and reassess.
How to solve this common budget problem: You need an emergency fund.
I would argue you need one regardless of your financial situation, but especially if you are in debt. Having money set aside for emergency purposes makes a huge difference, both for your budget and your peace of mind.
Problem: Your budget is not tight enough
The flip side to the tight budget is one that has too much breathing room. This is particularly problematic if the “breathing room” is imagined.
The purpose of money is to spend it — but it’s important to make sure you’re spending money that actually exists, you know?
I’m not saying you need to budget every single dollar (although hey, if that’s your thing, you do you!) but if your budget doesn’t ensure all your obligations are met, you’re going to run into problems.
How to solve this common budget problem: Start tracking your spending.
Tracking your spending is a great way to see where your money is actually going. This makes it easier to adjust your spending.
Problem: Your budget is the wrong style for your life
Don’t let my-way-or-the-highway personal finance guru’s fool you: when it comes to budgeting, there’s no one size fits all.
For example, we use credit cards almost exclusively as part of our budgeting process now. We started our debt-free journey using an all-cash budget. After a year of struggling to make it work, we went back to credit cards.
And it’s been working for us.
How to solve this common budget problem: When it comes to creating your budget, it’s important to focus on what works for you. If you’re struggling with your budget, consider trying a new style.
Problem: You’re not following your budget
Of course, all of the above is for naught if you create a budget and don’t follow it.
I get how this happens. At first, following a budget can feel restrictive. But one thing I have found to be true is the longer I follow our budget, the more freedom I find. Our budget helps show me what’s possible now, while providing a path forward for the future.
But I didn’t get here right away. It took time.
How to solve this common budget problem: I wish I had better advice on how to push back on this common budget issue. Unfortunately, all I’ve got is this: you need to stick it out in those early days. Keep following the plan, knowing it will pay off in the end.
Additional advice for living life on a budget
Taking the steps necessary to get your financial house in order is a big deal. Creating a budget is a great way to do that; if that’s a step you’re taking this year, I have two additional pieces of advice for you.
First: ditch the all or nothing mentality. The reality of life on a budget is that sometimes, despite your best efforts, it doesn’t work. For example, you’ll have months when you’re over budget — and that’s OK. The best thing you can do is keep going and doing your best.
Second: it’s important to celebrate your accomplishments! This is particularly true, I find, if you’re paying back debt. Finding ways to acknowledge your success is so important to staying motivated on the journey to financial freedom. What this looks like will be different for everyone. The important thing is to do it.
Budgeting can be freeing — but it only works if you do.
If you’re struggling to make your budget work, you might be getting tripped up on one of these common budget problems. Taking steps to address them can help you achieve your financial goals — this year and beyond.
What style of budget do you use?