Despite the effects of the current onslaught from inflation and ever-increasing prices, the basic concept of budgeting hasn’t changed. Dividing up your money into little piles for the various things you need (and want) doesn’t seem like such a difficult process, so why is a budget so hard to put into practice?
The simple answer is that no matter how small those little piles get, they still add up to more than you have! Yes, more money will certainly help, but also make sure it isn’t your budgeting process that is contributing to your failure. Here are eight things that can easily derail any budgeting system.
1) You didn’t start with the right number.
Your take home pay (AFTER all deductions) is the starting point.
2) You used the wrong time frame.
Some bills are monthly, but most of us get paid every two weeks. A two-week spending plan is much easier to follow and matches up with your cash inflows.
3) You had no idea how much you were spending when you made your budget.
Track your expenses for at least two pay periods and create your budget based on actual data, not your best guess. You can always tweak the amounts if it proves to be unrealistic.
4) You forgot to record all of your expenses.
Whether you use the latest app or a collection of post-it notes to track expenses, it needs to be quick, easy, and you need to make it a habit. Don’t forget expenses which are seemingly invisible but still need to be tracked, interest expense on credit cards or lines of credit for example. Leave your cash in the bank and use a credit or debit card for everything so you can easily view your bank or credit card statement to see exactly where your money went. Many banks now offer some expense tracking capability right in their online banking system.
5) You spend too much.
Just because you had been spending $400/month on dinners and drinks doesn’t make it a reasonable or sustainable amount for your budget. List up your needs, analyze your wants, and set priorities… force yourself to make choices!
6) You didn’t contribute to a reserve fund.
Unexpected expenses like birthday presents, car repairs, or a trip to the dentist can all derail your budget if you don’t have an emergency fund to dip into. Make sure to set aside some sort of contingency cash to give you a little wiggle room.
7) You didn’t ensure your spouse/partner/kids were on board.
It’s a household commitment with all-hands-on-deck. Take the time to explain to your kids that the actual supermarket cost of the food in a take-out burger & fries is likely around $2, and that by cooking your own burgers & fries you now have $5 more in your jeans (and arguably a much better burger!). Don’t be shy about telling your friends either– declining an invite for a night out you can’t afford is not a crime, and chances are they can’t afford it either.
8) You had no goal and lost your “mojo”.
Pick a realistic goal your budget will help you achieve and track your progress… paying off a credit card? topping up your RESP/TFSA/RRSP contributions? eliminating your line of credit balance?
Creating and maintaining a budget is a lot harder than it seems. Most of us will have to make some tough choices and rearrange priorities, so make sure you have a good process in place to evaluate those decisions and keep you focused on your goals.
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This post was originally posted on the Dominion Lending Centres ‘Our House’ blog, the original post can be found here.
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