Budget Not Working?!? Here’s how to make your budget better
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Here’s how to make your budget better (why budgets fail and how to fix them)
Even if you know how to budget, live by a budget, and feel budgets are important to personal finance, there’s always room to make your budget better
Budgets are essentially a spending plan for your money. They provide focus, and they’re crucial to saving more, paying off debt, and reaching many of our financial goals.
But budgets aren’t always perfect. So if your budget needs a little work, or if you’re starting your budgeting journey, here’s a look at five ways to make your budget better.
1. Write out your budget to make it better
There isn’t a single way to budget, but rather different ways depending on personal preference.
Some people prefer budgeting apps whereas others use spreadsheets. Both methods can work. But these aren’t the only options for creating a budget. You can also write out your budget—by hand.
Understandably, with the use of technology you might feel that writing out a budget *by hand* is old-school. But before you completely dismiss this idea, I recently stumbled upon a study that said “people are 40% more likely to stick with something when they write it down.”
According to the study, writing by hand is good for the brain, and there’s something about the act of putting pen to paper that activates the visual areas in our brain. So if you write out your budget, it’s more likely to stay on your mind.
Now, of course, I’m not saying you shouldn’t use apps or spreadsheets. These methods work for a lot of people. And if they’re working for you, by all means continue.
But if you’re struggling to stick with your budget, writing it out could make all the difference in the world.
Don’t use any type of notebook or paper, though. It also helps to make your budget pretty. So consider using a notebook or planner designed specifically for budgeting. This can get you excited about budgeting, thus helping you stay on track.
If you’re interested in a 12-month budget planner and bill tracker, check out this Etsy store. I have one of these planners and I love it because it comes with a host of amazing features. For example:
- annual payment tracker
- debt organizer
- debt payment tracker
- savings tracker
These budgets provide essentially everything you need for your finances, plus they’re available in a variety of designs.
2. Be realistic with your budget
Another way to make your budget better is to be realistic. In the past I’ve spoken about the 50/30/20 budget—which happens to be my favorite method.
To recap, this budget involves spending no more than 50% of your after-tax income on needs, 30% on wants, and 20% on savings and debt repayment.
If you’re able to keep your spending within these percentages, you’ll always have money left over for savings and debt repayment.
But while this is a popular budget, it might not be realistic to your circumstances TODAY. So you’ll need to tweak the plan based on your current situation.
To illustrate, if you’re currently spending 70% of your after-tax income on needs, you can’t decrease this category by 20% overnight.
What you can do, however, is adjust spending in the other two categories. For example, you might spend 25% on wants and 5% on savings and debt repayment. Or, you can spend 15% on wants and 15% on debt and savings. As your financial situation improves, you might eventually get your needs category down to 50%.
Bottom line, if your budget isn’t realistic, you’re setting yourself up to fail.
3. Give your budget time to work
Another problem is that some people don’t give their budget enough time to work.
The reality is that you might have to play around with the numbers over several weeks to come up with a budget that works for you. And honestly, you should mentally prepare for the possibility of your budget failing—at least in the beginning.
If you’re new to budgeting, you’ll likely make a few mistakes. These can include underestimating your expenses. And, of course, being unrealistic.
This doesn’t mean that budgets don’t work, but you’ll have to go back to the drawing board and tweak a few things.
4. Budget using cash envelopes
I absolutely love the cash envelope method. I no longer use it today, but it worked really well for us in the past. You can use it for all spending categories, but it’s especially helpful for those categories where you normally overspend.
Some people overspend on food, whereas others overspend on recreation or entertainment. Whatever the category, use the envelope system to stay on track. Here’s how it works…
Let’s say you budget $100 a week for grocery shopping. You’ll then put $100 (cash) in an envelope marked food. And when you go to the store, you’ll only bring this method of payment. When the money is gone, it’s gone.
The envelope method forces you to be conscious of your purchases and spending—while you’re shopping.
5. Look at your year in advance
Some people forget to budget for annual expenses such as gifts, annual renewals, personal property taxes, and things of this nature. If you don’t have a lot of disposable income, annual expenses can throw your budget off track.
Now technically, you can use money in savings. But I recommend “not” getting into a habit of using your emergency funds for non-emergency expenses. Instead, look ahead and create a list of annual one-time expenses.
Estimate the total costs of these expenses, and then set aside enough money each month. Let’s say you estimate $1,000 in annual expenses. In this case, you’ll set aside $83 a month, or $20 a week—in a sinking funds account.
6. First, review your spending
Every budget involves variable expenses, which can change from week-to-week, so it’s also important to review your spending on a weekly basis.
This might seem like overkill, but variable expenses are a budget-killer. These can include food, gas, entertainment, recreation, and miscellaneous shopping.
Since these expenses can change weekly, if you don’t regularly review your spending, there’s no way to know if you’re on track or if you’re overspending.
You might not realize that you’ve overspent until the end of the month —after you’ve run out of money. So at the end of each week, calculate how much you’ve spent on variable expenses. If the amount you spent exceeds the budgeted amount for that week, you’ll need to spend less in this category the following week.