5 Ways to Fix a Failing Personal Budget

Nearly one in three Americans maintain a detailed monthly budget, which is a disappointing number. If maintained, budgets can help you save money and stay on track with your spending. Most people experience a time when their budget fails due to unexpected expenses, and this is normal. However, if you are having consistent trouble staying on budget, there may be specific reasons why.

Your best bet is to actually add money to your monthly budget that is destined specifically for emergencies or unusual expenses — that way, the money is already in your account when you need it. In addition, sometimes prices change, which also affects a budget. As frustrating as it is to go over your budget regularly, you are still better off having a budget than not. Read on to learn how to fix five issues that often bring down a personal budget.

Source: Thinkstock

1. Budget for emergencies and extra expenses

You’ve probably heard the importance of an emergency savings many times before, and it is an essential part of maintaining a budget. You should have money saved for at least three to six months’ worth of expenses in order to protect you in an emergency. If you are unsure what your exact monthly expenses are, check out this emergency fund calculator. If you have no emergency fund right now, you should prioritize that as a big part of your budget until you have at least a few months’ worth of expenses saved. Then, if possible, set aside some money in your budget to save for your emergency fund each month.

You should also factor in unexpected (non-emergency) costs into your budget: include money for birthdays, school or work items, clothing, and so on.

2. Change your budget when circumstances change

gas oil petrol diesel

Food prices, gas prices, and prices for pretty much everything else fluctuate, and if you keep your budget the same and never change it, you are setting yourself up to fail. You should anticipate small changes (like grocery store prices and sales) and hopefully be able to maintain your budget by spending less some months if during other months you have to spend a little more.

However, if prices go up and seem to be staying there, you should adjust your budget to reflect the price increase. Certain bills will always change during cold or hot months, like utility bills. Most utility companies offer some sort of level pay option, which allows you to pay the same each month (the company will usually calculate based on the previous year’s bills.) Knowing how much your utility bills will be each month can really help you stay on budget.

3. Don’t make your budget too loose or too restrictive

Tighten Your Belt - Austerity

If you make your budget too restrictive, you’re setting yourself up to fail. While it’s important to save money, not allowing yourself (or your family) enough money to cover expenses and have a little fun, too, will put you in a bad rut quickly. You then will feel disappointed in yourself. Your budget won’t succeed if you can’t pay for the things you need because they aren’t included in your budget properly.

On the other hand, making your budget too generous will prevent you from saving money. In addition, if you set your individual budgetary requirements too high, you may overspend. Many people want to budget enough so they set high monetary values for different items, but that sometimes encourages overspending. If you set $600 per month for groceries, you don’t have to spend all of it. If you are able to save in some places, you can set the money aside for another month.

4. Set realistic expectations

Source: Thinkstock

Going along with point three, point four is an extremely important step because setting realistic expectations will help you succeed with your budget. In addition to setting realistic amounts for each budgetary item, it’s equally important to give yourself time to get used to a budget. If you’ve never budgeted before (or you recently made large changes to your budget), you can’t expect to change overnight.

Getting used to a budget takes time and patience. Although you shouldn’t use this as a crutch to overspend, you should give yourself at least a few months to get used to your budget. If you believe you are going to go from no budget (or a failing budget) to a successful one in only a month or less, you are setting yourself up to fail. People often get stuck in negative thinking when they don’t succeed, so it is completely reasonable — and even necessary — to give yourself time.

In addition, you have to set your expectations based on how much money you actually make. Even if you have the best intentions, you can’t go from saving nothing to saving $1,000 per month unless you make a large amount of money or have few expenses. Be fair to yourself.

5. Set aside time to work on your budget

Source: Thinkstock

Another common reason that budgets fail is because the people making them don’t have time to update them or change them. Budgeting is stressful and time-consuming. Try to set up a time each week to update your budget. That way, you will know where you are going over and where you are doing well. If you budget with someone else, find a time that you can both talk together.

If kids are involved, choose a time that your kids are at an activity or in bed. Trying to do a budget while kids (or other distractions) are present is a recipe for arguments. Arguments about money are the top predictor of divorce, so prioritizing your budget (and discussing it at an appropriate time) is very important.

It’s never too late to start budgeting, and you can always improve your budget, as well. The key is to set realistic expectations and be willing to change your budget when necessary.

More From Wall St. Cheat Sheet: