8 Reasons Why your Budget is Not Working and How to Fix It

Budgeting can be an invaluable tool when it comes to reaching financial stability and future financial success. It can help you effectively take control of your money, save for the future, and achieve your financial goals.

However, budgeting is not as easy as it first seems. Many of us face budget struggles and this can quickly lead to financial stress, confusion and uncertainty. In this fool-proof guide, we’ll explore the reasons why your budget isn’t working and provide practical solutions to fix it.

Not Keeping Track Properly

One of the biggest cardinal sins of budgeting is failing to accurately track all of your money. When you don’t fully know where your money is coming from and going to, it becomes impossible to budget effectively. You will quickly start to lose track of your expenses and this could make it very challenging to stay within your budget. In extreme cases this could even leave you in debt.

So if your budget does not seem to be working for you, the first thing you need to check is if you have accurately tracked everything.

Don’t worry, keeping track of your money doesn’t have to be complicated. If the thought of massive spreadsheets scares you like it does me, why not just write down a list of your incomings next to a list of your outgoings. This will give you the bare bones that every budget needs.

Take you time and make sure you unearth all of those pesky subscription and other expenses that are so easy to overlook.

Alternatively, you could download a budgeting app. There are some great beginner-friendly ones such as Snoop that help you track all of your money and even help you find more ways to save money. With an app, you are much more likely to keep track of everything and never have the dread of having less money in your account than you expected.

Setting Unrealistic Goals

Setting goals is a great way of keeping yourself accountable and having motivation to aim for something. However, setting overly ambitious goals can spell disaster for your budget. Unrealistic expectations can quickly lead to frustration and may even cause you to abandon your budget altogether.

So if you are relatively new to budgeting, don’t set a goal to cut your monthly expenses by half because that is just not feasible, especially in one month! Instead, set realistic, achievable goals that you know you can reach with a few simple lifestyle changes. I personally started by cutting down my spending by 10%. This was a small goal that I hit with ease, but it gave me the motivation I needed to keep going, work harder and save more.

Once you start achieving your goals you will get more motivation to save more and set bigger goals.

It is also important to make sure your goals are not too big that they actually discourage you from trying. If you already think you are not going to hit your budget goals for the month, you are much more likely to give in and start impulsively spending on things that you do not need.

Ignoring Variable Expenses

Variable expenses are one of the major enemies of any budget. Those irritating, irregular costs can pop up unexpectedly and wreak havoc on your budget if you have not properly accounted for them.

Maybe your energy bill varies considerably from month to month. Maybe you have some months where you use your can much more so you need more money for fuel. Or maybe you have forgotten how costly holidays such as Christmas and Birthdays can be.

Whatever your variable expenses are, you need to make sure you are accounting for them, both in the expensive months and also in the less expensive months.

This is where many people hit problems.

Your expenses are lower one month so then you adjust your budget accordingly. But when the next month is more expensive due to these variable expenses, you have not budgeted properly for them and you are then trying to scrape together the funds you need from other parts of your budget.

Ignoring variable expenses can be very risky and could cause you to dip into your savings or get into debt during the more expensive months.

To combat this, I would recommend basing your budget around the higher end of each variable expense. So if one cost varies month to month between £100-£200, I would set aside £200 every month. This way you are covered for the expensive months. And on months where the cost is lower, you have extra money that you can put into your savings or other sinking funds.

Not Having an Emergency Fund

If you do not have an Emergency Fund yet then you need to start saving for one immediately. An emergency fund is your financial safety net, and not having one can lead to serious financial stress and a complete budget breakdown when unexpected costs arise.

An Emergency Fund is a pot of money set aside in a bank account specifically for unexpected, “emergency” costs. You can use it when your car breaks down or if you lose your job, in order to avoid sudden, financial stress. This can save you from having to resort to using credit cards with high interest rates or pay day loans.

Not having an emergency fund when you are budgeting is a recipe for disaster. Especially is you are zero-based budgeting where you allocate every single penny of your income into your budget.

Imagine if you suddenly had to find £400 for urgent car repairs… would your budget allow for that? Of course it wouldn’t!

That is where an emergency fund can save you. Your emergency fund can be there and ready for you whenever you find yourself in unexpected financial stress.

If you don’t know where to start when it comes to emergency funds; if you want to know how much you should save and where you should keep it you need to read my comprehensive guide to Emergency funds and why they will save your finances.

Not Budgeting for Fun

Just because you are on a budget, doesn’t mean you can’t live your life. Budgets are not about restricting yourself; they should help you be mindful with your spending whilst still including room for enjoyment.

If you don’t budget in for hobbies and social occasions then you are much more likely to resent your budget and eventually throw in the towel.

I know many people decide to cut out most of the “fun” first when budgeting as it is supposedly the easiest to get rid of. But this is a huge mistake. Everyone needs a fun outlet in their life whether that is a sport, a hobby or just regularly meeting up with friends.

Don’t let your budget dictate your happiness.

Planning fun into your budget is a great way to stay mindful of your spending but still have a great time. I have created a whole post on how to have a social life when you are on a budget so make sure to have a look for some inspiration.

Not Adapting and Adjusting Your Budget

Another reason why your budget is not working for you could be that you are simply not adjusting your budget as your circumstances changes. Financial circumstances are forever changing, so it only makes sense that your budget should evolve with them.

If you change your job but then don’t adjust your budget based on your new income you will not getting the most out of your money. If for some reason your income decreases and you don’t adjust your budget you could open yourself up to a world of difficulties.

This works the same way for your main expenses. If your rent increases, you need to make sure to account for it in your budget so you know you will have enough money set aside for it each month.

To make sure you are never caught out by this, I would recommend planning a budget review at the end of each month. You can review all of your income and expenses and make any adjustments you need to, ready for the month ahead. It should only take an hour out of your day, but it will ensure your whole budget for the month is accurate.

Not Budgeting for Annual Expenses

I don’t know about you, but I am always shocked when I am hit by annual expenses and subscriptions. We are so used to monthly expenses and all of the direct debits that go out of our accounts each month, but annual expenses seem like such a surprise when they crop up.

Car insurance, M.O.Ts and some subscription services are all charged annually and they can often catch people off guard.

To prepare for these annual expenses, you may want to factor them into your monthly budget. Simply divide the expense over 12 months, set aside the cash each month and then when the expense crops up you have already got the money for it.

If you want to take it even further, you could put any spare cash you have at the end of the month into a sinking fund specifically for annual expenses. Then you can just dip into that fund whenever the annual costs arise.

Forgetting to Track Physical Cash

In our increasingly digital world, it’s easy to forget about physical cash. But cash can help boost your budget when you least expect it!

When you are out and about and pay with cash it is easy to think that it doesn’t count. I have to say I am very guilty of this. “The money was never in my bank account so maybe I didn’t technically spend it…”

As great as it is to not see your bank balance go down, it is still crucial that you keep track of your cash spending. This way you will know exactly what money you have and exactly what you have spent that month. This, in turn, will help you plan and budget for the next month.

If you have been part of the contactless crew for a while now, I strongly recommend you look around the house, dig into old jackets and purses to see if you have any cash lying around. You will probably have more than you think! And in the world of budgeting, every penny counts!

Conclusion

Budgeting can be an invaluable method for achieving financial security and success. Hopefully now that you know some of the common reasons budgets fail, you can implement some of the solutions and regain control over your finances. Remember, reaching your financial goals is a long process. But as long as you stay on track, you will see results.

It may be stressful at times but a well-functioning budget is the key to financial peace of mind, so never give up!

How do you keep track of your budget? Let us know down below!