How To Budget: Part 3 - Common Obstacles

At this point, I hope you’ve had some success in establishing your budget. Part 1 of this series covered the income side of monthly money planning. Part 2 covered the expenses. If you haven’t read those and made your money plan for the month, check them out and get your budget done. It is absolutely critical to your financial success. In this last part of this series, I want to discuss 5 common obstacles that threaten your budgeting success.

Once you have established a budget, the hard part begins: Sticking to your budget. After all, the budget is the plan. Now you have to execute that plan. In one way or another these obstacles will threaten to derail your plans if you don’t deal with them. And speaking from experience, you don’t want to get derailed. Building some consistency and momentum in your budgeting is really going to help propel you toward your financial goals.

1. Perfectionism: I put this one first because I feel like it is most dangerous when you first start budgeting. Especially your first 3-4 budgets, don’t think they’re going to be perfect. Our first budget was awful, and that was after I had analyzed 3 months of expenses beforehand to get an idea of our spending habits. The important part is not to have a budget that is spot on early in the process, but simply to get started. If you are anything like me, you haven’t made a habit of budgeting. That is what we’re trying to change. So get a budget down on paper (or virtually), and adjust as needed as you learn. This is your starting point. Each month as you do your budget, it will get better and better.

2. Keeping Your Budget Static: Your budget is not a “set it and forget it” item. Especially early in the process, things are going to come up that you forgot to plan for. Once or twice a year expenses are common culprits here, as are birthdays. Plan for as much as you can, but know that you will forget some things. Throughout the month, you need to be revisiting your plan. Certainly if an unplanned expense comes up, review your budget and adjust it as needed. If you are married, set up weekly meeting to review the budget and check progress. If you aren’t married p, find yourself an accountability partner who can meet with you. I know weekly sounds tedious, but at first you have to go a little overboard to change those habits. I can tell you, after a while these “meetings” become little more than brief discussions.

3. Balance: You need to find your balance between too many and too few categories for expenses. Categorizing your expenses is very useful to help you understand your spending habits. Throwing all your hosing expenses (rent/mortgage, insurance, utilities, internet) into a single large category might not offer you enough insight. If your spending in that category seems high, you can’t easily look at it and see which might be bumping your expense up. If you break it into those individual categories, you can see if it is your insurance or your utilities that are too high. However, you don’t want to take it too far. Breaking all your entertainment expenses (movies, Redbox, etc.) each out into to own category is going to make budgeting tedious for you every month. The key is to find that level that works for you. The best budgeting methods are the ones that you will keep doing. We use EveryDollar which has most of the categories we needed, and we added in a few of our own to suit our needs.

4. Agreement: You and your partner need to be in agreement on your financial goals and come to an agreement monthly on your budget. If you can’t agree on your goals, you’ll struggle to agree on your budget, and agreement here is critical. It is what allows you to say no when one of you wants to make an out-of-budget purchase. As we already talked about, you’re going to forget expenses sometimes. Agreement is critical here, too. If you are going to adjust your budget to accommodate a forgotten expense or something that came up that might need to be purchased, you both need to agree to make the change. Now, it is likely that you and your partner will not agree about everything in the budget. That’s OK. Compromise is a cornerstone of any healthy relationship. Come to a consensus and use that going forward in your budget. If you aren’t married, your budget agreement is easier because your opinion and goals are the determining factor. However, you don’t have a built-in accountability partner. For that reason, I suggest sitting down with someone who is willing to help. Discuss your financial goals, then your budget. They can help keep you accountable. Whether or not you are married, I suggest you sign the budget. If you do your budget electronically, try to print it out. This signature is your promise that you will do your part in executing that plan.

5. Mindset: Although I saved this one for last, it may be the most important to overcome. Most people will need to overcome it in the beginning of this process, but you will feel it creep in later as well. Especially if you’re tightening your budget down to pay off debt. Get past the mindset that a budget is a straitjacket for your wallet. As long as you feel this way, you will resent your budget, and that will not help you build a habit. I’ve discussed it elsewhere, but a budget is simply a plan for your money. You should have some idea of your financial goals. A budget is part of the roadmap to get out there. A budget allows you (forces you 😊) to plan your expenses. It’s you telling your money where to go instead of wondering where it went. I’ve talked to many people who looked at their expenses from before they started budgeting. Without fail, they have some category they are almost ashamed to admit how much they spent. Without a plan, your spending can take on a mind of its own. Budgeting reins that in and puts your money to work for you, toward your financial goals instead of it leaking away.

These certainly aren’t the only obstacles that can hinder your financial success, but they are some of the common ones. If you can tackle these and build a habit of monthly money planning (budgeting), you will be well on your way to meeting your financial goals. As always, if you need any help throughout this process, contact me. I want to see you win financially.