Budgeting is a topic that stirs a lot of emotions and opinions in people and I’m sure the last thing you need is some guy attacking you about your finances. After all, the economy is in tatters, the money isn’t holding value and earnings just arent keeping up with prices. None of these things can be understated, however, the key to wealth will always be how much money you keep and what you do with the money you keep. So budgeting is very important in maximising the amount of money you keep. Budgets are not about squeezing money but rather allocating resources to meet goals. So if yours is not working you might find the reasons, or reasons listed below.
You’re not serious about it
Let’s be honest, is your budget even in writing? If you can’t commit to writing it down the chances of committing to action are very slim. There’s a very simple test you can use here to determine whether or not you are serious about your budget; if you handed overall control to someone else would they have sufficient instruction from your budget documentation to carry out all that is required? Are there hidden expenses? Is it detailed? Is it accurate? If you can’t pass this test then you’re definitely not serious about it.
You’re not tracking all expenditure
Tracking expenditure is also very important. The budget is the plan or vision while expenditure tracking provides the evidence. A well-made budget shouldn’t have a problem if it is based on an expenditure tracking pattern that is known and documented. I went through the process of documenting my expenditure before going into a budget plan and let’s just agree that you do not know yourself until you see your expenditure listed. I used an app which I recommend but you can look at many other alternatives for the same purpose. Some expenditure slips the memory because we think of it as being small but the small ones add up. If you have a recurring expenditure item that seems too small to worry about it may cumulatively be doing a lot to affect your overall budget.
You disregard irregular expenditure
There’s a school of thought that we have encouraged when it comes to dealing with our inflationary environment, that is the idea of buying/ paying for certain things in advance where possible. Even in environments where inflation may not be so high service providers tend to offer great discounts for paying in advance. Take for example your vehicle licensing fee which you can opt to pay quarterly, semi-annually or annually. It’s good practice, however, it can throw you out of balance if you don’t plan ahead for the next hit. Things like this can really throw budgets off as the amounts can be considerable. So think of those fees you pay once a year or at not so regular intervals when planning.
Not planning for the unexpected
Then there’s the unexpected. You don’t so much plan for it than prepare for it. You know not when it will come it may not at all but it is surely better to be prepared for something that never comes than be unprepared for something when it comes. I’m sure we all know about emergency funds and insurance so I won’t dwell on them too much but rather speak about a little-acknowledged fact especially when one brings our economy into play. While you will often hear people say they can’t afford to put money into an emergency fund because of the economy I would say you cannot afford not to have an emergency fund in this economy. The unexpected tends to hit very hard in such circumstances and the fall out can be massive. So the reality is what we cannot afford is not having an emergency fund. We must understand that emergency funds are not built overnight. Depending on circumstances it takes 3-5 years to build a 6-month emergency fund comfortably. And you don’t have to have it in local currency as you are free to go and buy up to US$500 from any bureau de change no questions asked.
You’re not following it
Well if the plan is there and the plan is great the only other reason it’s not working is because you’re not following it. We could have an academic debate about whether the problem is poor planning or poor implementation but in my experience, the result is the same. The goals are not achieved. Best way to deal with this is to make a plan that is specific to your circumstances. A working budget, not a fanciful idea of how you would like to work with money.
When all is said and done a budget is supposed to work for you, not on you. It’s about making a financial plan to meet your objectives and make sure that priorities are taken care of. If it doesn’t feel like this to you then your budget may not be one at all. It may be Alistair of aspirations that matter to other people or sound good in your head. Hopefully, this helps you work through yours.