Budgeting can be difficult for a variety of reasons. Keep reading as I explore 12 common budgeting challenges and what you can do to overcome them.
12 common budgeting challenges
1. Not earning enough money
If you never have much money left after paying bills, budgeting may seem futile (or even impossible). A survey by The Balance indicates half of Americans face this struggle, having less than $250 left at the end of each month. A staggering 12% (or 39 million people) have nothing left at all.
How to overcome this budgeting challenge
The most obvious solution to this budgeting challenge entails earning more money. While this may seem easier said than done, there are actually many low-commitment strategies for making extra money outside of a traditional job. Here are two idea-packed articles I’ve written on this exact topic:
Additionally, you may find my article on how to save money when you have none useful. In it, I share several tips that go beyond “make more money.”
2. Unexpected expenses constantly throwing you off track
I’ve faced this budgeting challenge quite often. Everything seems to be going well then BAM – I’m hit with an unexpected expense that throws my budget out of wack.
If you own valuable assets (i.e. a car or home) or have dependents, this sort of thing will inevitably happen once in a while. Without careful planning, it can derail your budget for months on end.
How to overcome this budgeting challenge
Just because an expense caught you off guard doesn’t mean it was actually unpredictable. In fact, if you think carefully, you’ll likely notice most of these expenses were foreseeable.
For example, you may not have known when your car would need new tires. But you probably knew tires don’t last forever. The same goes for roofing, computers, and any other valuable item that needs to be repaired from time to time.
Check out my article about planning for unexpected expenses. In it, I explore a few of the most common unexpected expenses, how much they cost, and how to budget for them smartly.
You can also overcome this budgeting challenge using the concept of sinking funds. If you’re unfamiliar, a sinking fund is a pool of money you build up over time to cover a significant expense in the future.
For example, you might set aside money each month for your next car. When your current vehicle is ready for the junkyard, you won’t have to scramble to find the money for a new one. That’s the idea behind sinking funds. Check out this article for some more details and tips on incorporating sinking funds into your financial strategy.
3. Frequently finding excuses to spend recklessly
You want to stay on budget. But as soon as a friend invites you out for drinks, you find an excuse to bend the rules.
Sound familiar?
This sort of thing happens all the time. According to a SlickDeals survey, Americans waste $5,400 impulsively every single year. Considering most Americans can’t afford a $1,000 emergency, it’s fair to say this is a devastating budgetary error.
How to overcome this budgeting challenge
For many people, the crux of this issue is often that it’s so easy and painless to spend money recklessly. For example, you can tap your credit card without mentally registering the fact you’ve spent money. This phenomenon has been measured in several studies (check out this article from NerdWallet for a good summary of the research).
You can make it much harder to spend money recklessly by using cash or your debit card more often. For starters, you probably have less cash available to you at any given moment than available credit. That alone will keep you in check to a degree.
You could even try a strategy known as the cash envelope system. It entails setting one envelope aside for each category in your budget. You’d fill the envelope with however much cash you’re allowed to spend in its associated category for the month. Once you run out of money in the envelope, you’re done spending in that category for the month. It’s simple yet effective.
If withdrawing cash and stuffing it into envelopes isn’t for you, consider a digital variation. Set up automation that transfers money into various accounts dedicated to budget categories. From there, it’s the same idea – once you run out of money in a particular account, you’re done spending money in that category.
4. Not being motivated to stick with your budget
If managing your money wisely doesn’t excite you, it’s only a matter of time before you fall off the wagon. After all, advertisers spend millions of dollars making products seem ultra-exciting to lure you in.
How to overcome this budgeting challenge
This is another one of the most common budgeting challenges people often encounter as a result of poor planning.
To overcome this budgeting challenge, identify specific reasons you’d be well-served by managing money wisely today. Here are some common financial goals:
- retiring early
- buying your first home
- going on a vacation
- achieving financial freedom
- acquiring enough money to change careers
You’re much more likely to stay on budget if you associate it with goals such as these. You’ll never feel like your sacrifice is in vain.
There’s a second reason people encounter this budgeting challenge. It relates to my first point of not earning enough money.
You may not feel motivated to budget if doing so only helps you get ahead by a few dollars every month. You might say, “meh, I’ll revisit this budgeting thing when I’m earning more money.”
The important thing to remember, though, is that habits aren’t built overnight. You’ll be much better equipped to handle a higher income wisely if you have experience doing so with lesser amounts. Trust the process!
5. Fear of confronting your financial problems
Tackling budgeting challenges entails lots of self-discovery and humility. To some degree, you have to acknowledge things could be improved. For many people, that feels too much like a rude awakening – especially if consumer debt is involved.
How to overcome this budgeting challenge
First, recognize even the most seasoned budgeters need to revisit and rework their strategies occasionally. In fact, the act of evaluating your progress arguably makes you better with money than someone who spends blindly with no self-reflection.
You should also consider evaluating your finances with a licensed advisor who can help put things into perspective. Even your most egregious mistakes probably aren’t as awful (or difficult to recover from) in the grand scheme of things as you might think.
6. Frequently splurging on a particular thing
We all have our thing we enjoy spending money on. Mine is food. I’ve blown up my budget more times than I’d like to admit because I just had to try out a food recommendation someone gave me. This seems to be a common occurrence, with Americans splurging $2,746 on food in an average year, according to a survey by Visa.
How to overcome this budgeting challenge
Forcing yourself to spend less in your problem category is the most obvious solution here but it’s just one option.
I like the approach Ramit Sethi encourages in his book I Will Teach You to Be Rich. The idea is to cut spending mercilessly in categories you don’t care about with the goal of spending more on things you do value.
For example, food and travel are important to me. Driving a nice car? Not so much. That’s why I own a Corolla but travel and dine in five-star establishments.
Too many people take the opposite approach and splurge on everything without considering which purchases would actually make them happier and which are purely for show.
7. Having an irregular income
Shift workers, contractors, and business owners often have highly variable incomes. If you fall into this category, you may have a hard time budgeting due to the inherent difficulty of predicting your income and subsequently gauging what’s appropriate to spend.
How to overcome this budgeting challenge
As with most budgeting challenges, this one can be overcome by thinking creatively.
A good first step would be to determine your average monthly income and expenses. Then, when your earnings are abnormally high within a given month, you should still spend according to your average income as opposed to that month’s earnings. Keep the rest for a month in which your earnings will be lower.
The sinking fund budgeting strategy will also be your best friend in this scenario. Maintain significant enough cash reserves to cover essential expenses (i.e. housing and food) in a reasonable number of lower-income months.
Lastly, you may find it helpful to bring some regularity into your finances if possible. For example, if you’re a contractor, you might consider trying to switch to a retainer-based pricing model (something I’ve seen work well with marketing agencies).
8. Black and white thinking
Some budgeting challenges (such as this one) arise because people misunderstand the goal of budgeting.
For example, they may think the goal of budgeting is to become a penny pincher who never buys anything that wasn’t planned months in advance. Alternatively, they might think there’s no point in budgeting if it wouldn’t help them achieve their financial ambitions anyway.
How to overcome this budgeting challenge
There’s more to personal finance than simply being “good” or “bad” with money. In fact, there’s a whole world in between those two extremes.
Even if the only initial benefit you reap from budgeting is cutting down spending in one problematic area, it’s a start. Once a positive new habit becomes your baseline, you can kick things up a notch and improve further. It’s all about taking baby steps forward.
Further, the whole “budgeting means pinching pennies” thing is a myth. Budgeting can be as simple as saying “I’ll set this much aside for bills, this much for saving, then spend the rest however I want.” That’s how I budget!
9. Having a hard time tracking your budget
Personal finance nerds notoriously love expense tracking spreadsheets. The average person, though? Not so much. They often don’t want to deal with manual data entry, formulas, or any of that “fun” stuff.
If you identify with the latter opinion, the challenge then becomes figuring out how to track your spending and verify whether you’re on budget throughout the month.
How to overcome this budgeting challenge
Many banks now have web and mobile applications that include automated budgeting and expense tracking functionality. No spreadsheets needed! I strongly recommend looking into whether your bank offers these features and utilizing them if so.
If your bank doesn’t offer these features (or you bank with multiple institutions), check out an application called Mint. It’s made by Intuit (which also makes TurboTax) and can pull transactions from all of your different bank accounts and credit cards. In the third point of my article on how to organize your finances, I walk you through the process of getting set up with Mint.
You Need a Budget (YNAB) is another budgeting application many people swear by.
My point? It’s not 2005. You’ve got options for tracking your expenses without spreadsheets.
10. Getting your partner on board
Any long-term relationship is a team sport. This is especially true when it comes to money since most couples that live together typically take on significant joint financial responsibilities (i.e. transportation and housing) as well.
If one partner isn’t on board with budgeting and continues to spend money without care, they can completely torpedo the other person’s plans (or even the entire relationship).
How to overcome this budgeting challenge
As with most budgeting challenges, this one won’t be overcome by just waiting it out and hoping for the best. You need to have serious conversations with your partner. Identify why they’re rejecting your efforts to budget and what the ideal next steps are.
Depending on the circumstances, it may even be worth bringing in a relationship counselor. After all, research indicates money is among the biggest causes of stress in relationships. If you can’t get on the same page financially, that doesn’t bode well for other aspects of your relationship.
11. Feeling like you don’t have enough time to budget
Next on the list of common budgeting challenges is the belief that budgeting takes lots of time and is an inconvenience. You’ll need to spend some time upfront creating the budget then periodically check in to ensure you’re on track and adjust accordingly.
How to overcome this budgeting challenge
While there’s no denying budgeting takes time, it’s arguably a worthwhile investment. Good budgeting practices will save you tens (if not hundreds) of thousands of dollars over the course of your life.
Additionally, the more you budget, the less time it takes. You’ll develop automated processes that help you set and maintain your budget without much effort.
In other words, the solution to this budgeting challenge is to just get started and streamline things as you go.
12. Fearing you won’t be able to have fun on a budget
As a result of budgeting, you’ll likely spend less money on discretionary purchases. That may not sound appealing. In fact, it makes budgeting sound like a buzzkill. Throw peer pressure from friends who don’t budget into the mix and it’s no wonder this is among the most common budgeting challenges people face.
How to overcome this budgeting challenge
Think back to my sixth point in this article. You’ll likely find this challenge is easily overcome by viewing budgeting as a means of limiting spending in areas you don’t care about while spending more on things you do. For example, let’s say going clubbing with your friends every weekend is important to you. In that case, view budgeting as a means of finding other areas to cut back in so you can keep going out.
It’s also worth mentioning that there are many cheap ways to have fun. Sticking with the previous example, let’s say you discover while creating your budget that you actually can’t afford to go clubbing every weekend, even after trimming your spending in other areas. In that case, why not find some other, cheaper activity to enjoy with your friends on weekends? You can still have fun – just not in the exact same way you used to.
Common budgeting challenges: Conclusion
I hope I’ve covered at least a few budgeting challenges (and their potential solutions) you can relate to in this article. In conclusion, while budgeting certainly requires work and a willingness to confront challenges head-on, it’s not impossible. In fact, you’ll end up ahead by virtue of simply putting the effort in.
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