12 Reasons Why Your Budget Isn’t Working [FREE PRINTABLE]

Have you ever attempted budgeting only to find it doesn't work for you? Do you find yourself giving up halfway through the month or ending up over budget by month's end? Don't lose hope! Today, I'm sharing 12 reasons why your budget isn't working.

 

1. You Don’t Give Yourself Permission To Spend

 

That's right, I'm giving you permission to SPEND MONEY! If your budget is too restrictive, you'll likely get burnt out and give up before making any progress toward your financial goals.

Story time: When I first started budgeting, I felt immense guilt every time I ate out, believing that money should go towards my debt. Then I had an aha moment: "Why don't I budget money for eating out?!"

This did two things for me:

1. It allowed me to enjoy eating out with friends without feeling guilty.
2. It set parameters for dining out, so I could enjoy it without spending hundreds of dollars and going over budget.

 

2. You Don’t Know How Much For Each Category

 

Do you know how much you spend on groceries or gas each month? The best way to determine how much to budget for each category is to conduct a spending analysis.

To do this, go through all of your bank statements (and receipts if you pay with cash) and enter all of your transactions into a spreadsheet for the last 3 to 6 months. It may sound daunting, but it is crucial to understand your current spending to establish a baseline. The spending analysis spreadsheet template will calculate the average amount you are spending and help you determine how much to budget for each category.

 

3. You Haven’t Updated Your Budget To Keep Up With Inflation

 

Next, re-evaluate your budget. With inflation on the rise, grocery and gas prices have skyrocketed. If you don't update your budget to reflect these changes and keep it the same as last year, you'll quickly find yourself in the red.

 

4. You Aren’t Updating Your Budget Throughout The Month

 

One common mistake I see when my budget coaching students start budgeting is that they put off entering their transactions until the end of the month. Don’t do this! Entering every transaction into your budget might sound tedious, but it’s crucial to know where every penny is going.

I recommend entering your transactions every couple of days. This way, it will only take a few minutes. If you wait until the end of the month, it could take over an hour, and you'll dread it! Additionally, entering your purchases into your budget every few days allows you to monitor your spending throughout the month. If you wait until the end, you might find you've blown your grocery budget, and by then, it’s too late to make adjustments.

For example, if you have a $400 monthly grocery budget and by week two you've already spent $300, you'll be able to adjust and get creative with your remaining budget. Keeping up with logging your purchases regularly helps you catch overspending early and stay on track.

5. You Aren’t Closing Out Your Budget At The End Of The Month

 

At the end of the month, it's very important to close out your budget. It can be tempting to leave $50 or $100 in your checking account as a “buffer,” but don’t do that! Trust me, that money will get spent. You'll rationalize overspending with thoughts like, “It’s okay to go over budget, I have a little leftover from last month.”

Instead, any leftover money should go toward your financial goals. Whether it's an extra debt payment, building up your emergency fund, or funding your Roth IRA, make sure every dollar has a purpose. Even if it’s just a $2.37 debt payment toward your student loans, allocate it accordingly.

 

6. You Don’t Have a Laser Focus Plan

 

One of the biggest issues I find with my budget coaching students is that when they have extra money to put towards their financial goals, they spread it out too thin. Here's what I mean:

For example, if you have an extra $200 at the end of the month, instead of putting $50 towards each of four debts to “pay them all off faster,” put the entire $200 towards one debt and pay the minimums on the rest.

There is a big debate between the Debt Snowball and Debt Avalanche methods. I have two thoughts on this:

First, the best method is the one that you stick to! Some people prefer the debt snowball because paying off a low-balance debt quickly provides a quick win. Others, with a more mathematical mindset, are motivated by seeing the amount they’re paying in interest and prefer the debt avalanche method to tackle high-interest debts first.

Second, do what works best for YOU! In a recession, when money is tight, it might be smarter to use the debt avalanche method. I predict that credit card interest rates will go even higher than they currently are. If you can’t pay your credit cards in full every month, stop using them now.

Whichever plan you choose, commit to it and stay the course!

 

7. You Haven’t Given Your Budget Enough Time

 

When you first start budgeting, it can be overwhelming, and it's easy to go over budget. Give yourself grace. It's not going to be perfect, especially in the beginning. Budgeting typically takes 3-6 months to become confident and start making progress. It's likely that you will go over budget in the first couple of months, and that's totally okay!

 

8. Your Expenses Are Higher Than Your Income

 

If you've been budgeting for 6 months and still find yourself in the red each month, it's time to take action. Here are two options:

1. Cut your expenses. Consider reducing spending in categories such as subscriptions, groceries, gas, eating out, and personal spending money. When cutting expenses, set realistic expectations. It's essential to recognize that it will take time. For example, don't suddenly slash your grocery budget from $600 to $100 for a family of five—that's not feasible. Instead, start by cutting $25 a week for a couple of weeks. Once you're comfortable with that, gradually decrease your spending until you reach your desired level.
2. Increase your income. If you've reached the limit on expense cuts and still find yourself struggling, it's time to explore ways to boost your income. Look for opportunities to earn more money through side gigs, freelance work, or seeking a higher-paying job. Remember, there's only so much you can cut from your budget, so increasing your income may be necessary to achieve financial stability.

 

 

9. You Aren’t Being Honest With Your Budget

 

Just as cheating on a diet leads to no weight loss, if you aren’t adhering to your budget—logging your purchases, and cutting back on spending—it won't work. It's tough love, I know, but it's crucial to be honest with yourself about how seriously you're taking your budget. Blaming the budget for not working when you're not fully committed to following it won't lead to financial success.

 

10. You Aren't Practicing Self-Discipline

 

I'm not one of those people who says cutting out your Starbucks coffee will make you wealthy overnight. However, I strongly believe in sacrificing now for a better future.

If you don’t know my story, I've faced significant financial challenges: my car was repossessed, my power was turned off multiple times, I had student loans in default, and I ate spaghetti with butter for dinner every night for over two years.

During my debt payoff journey, I made significant sacrifices, sticking to a bare-bones budget and working numerous side hustles to pay off debt as quickly as possible.

Fast forward to today, and I have thousands of dollars left over at the end of each month to put towards my financial goals. I don't share this to boast but to illustrate that it's possible. If I can do it, so can YOU!

With that being said, making sacrifices now for a short period can lead to incredible financial progress in the future. It's about staying focused on your goals and being willing to make temporary sacrifices for long-term gain.

 

11. You Don’t Have An Emergency Fund

 

It's essential to build up an emergency fund of at least one month's worth of expenses. Life is unpredictable, and unexpected expenses are bound to arise. Having savings set aside for such situations is crucial. Relying on credit cards for emergencies will only compound the issue with accumulating interest.

Keep your emergency fund in a high-yield savings account. This allows you to earn a bit of interest while ensuring easy access to the funds when needed. By prioritizing your emergency fund, you'll have peace of mind knowing you're better prepared to handle unexpected financial challenges.

 

12. You Forget About Annual Expenses

 

When reviewing your bank statements, it's easy to recall your typical monthly expenses like gas, groceries, and subscriptions. However, it's common to overlook annual or semi-annual expenses such as property taxes, bi-annual car insurance payments, car registration fees, or annual life insurance premiums.

Forgetting about these expenses can significantly disrupt your monthly budget. The best approach to avoid this is to keep track of your annual expenses and save for them throughout the year using a sinking fund.

A sinking fund is a separate savings account or fund specifically designated for anticipated future expenses. By setting aside money regularly for these larger, less frequent expenses, you can ensure that you're financially prepared when they arise, preventing any budgetary surprises.

 

Annual Bill Payment Tracker Free Printable Download