I have supported many people on their journey to financial peace and joy and this is the question I am asked over and over again so If you have tried budgeting in the past and gotten frustrated or encountered some challenges, this should help you keep going!
The #1 question people ask me is:
I created a budget, but life keeps surprising me and then my whole budget is blown. What do I do now?
When people create their budget they think they have covered every item, but then something happens and the expenses are beyond their income for the month and they feel frustrated. They feel like giving up because they aren’t sure how to get back on track.
When this happens you first need to pause and do two things:
Identify what adjustments can be made to the rest of the month What did you have planned that you can cut back on? Any social plans? Any personal spending? Dining out? Meals out? Coffee runs?
What surprise or unplanned for expense caused this? How can you plan differently in future months?
Now if you ever find yourself asking, “Why does this keep happening to me every month?” then here are the 3 reasons for your budget failure and what you can do about them.
1. You budgeted from your income:
What this means is that you started by writing down how much your monthly income would be.
Then you started identifying your expenses and added them up along the way. When you noticed you were running out of income you stopped allocating.This generally means that none of your personally and discretionary spending was fully and clearly identified.
But just because you don’t write it down doesn’t mean it won’t happen!
I know that none of us wants to see that our expenses are larger than our income, but we need to see a complete list to make conscious and mindful decisions about our expenses.
How to change this:
Review all of the expenses that you incurred on your bank or credit card last month.Use this as a guide to make sure each of these categories are identified when planning for this month.
Group your expenses by necessities, then debt payments, and then finally your discretionary spending.
If your expenses are larger than your income for the month it is time to evaluate the list and determine what changes can be made.
Are there any services or costs in your necessities you can cancel or reduce?
Can you change your insurance coverage to make it less expensive each month?
Can you cancel your cable service to lower your monthly costs?
What is in your personal spending for the month?What expenses in this category could be postponed or skipped?Are there similar opportunities available for less money?
We have the power to choose where our money goes each month!
To make appropriate choices we must be honest with ourselves an identify all the expenses that we may really encounter in the month.
2. Your budget wasn’t realistic:
Many times we think we went through every possible spending category and expense and planned for everything, but then we didn’t stick to our plan.It’s ok, we have all done this and we have all had this happen to us.It would be impossible to plan for every possible scenario in life.
Here’s how to plan for the next month:
Identify what happened that caused you to be unable to stick to your budget this month.Was there an emergency or a was it an expense you had forgotten about?
Perhaps you didn’t budget for eating out and ended up going out for lunch and dinner a few times.Your initial reaction may to be hard on yourself for not sticking to the budget and being careless, but before you go down this path of negativity take a pause and ask yourself what led you to eat out when it wasn’t in your budget.
If there aren’t funds in the budget what is causing you to eat out?Desire to be social?Not having lunch packed?Working too late to make dinner? These are what we truly need to address in our life to resolve this budget issue.
Instead of continuing to create a monthly budget that says no eating out you need to address the underlying issue.If you can’t afford to eat out but feel like you never have time to pack a lunch, what could you do differently?Do you need to create time for meal planning?Do you need to buy an easier lunch option when grocery shopping?If you are stopping for dinner because you keep working late, but you can’t afford to keep doing this what are your options?Can you have something quick and easy on hand for when you get home late?Would a meal in the crock pot on busy days be an option?
When you address the underlying problem that is causing the budget to not work that is when you can solve the problem and stop the financial bleeding.
3. Your budget that is too strict:
In step 1 above I outlined how to break out your monthly budget by necessities, debt and personal spending.Total each of these categories independently so you know how much money is being spent in each one.Then, ask yourself, is all your money budgeted on necessities and living expenses?If so, you have created a life and a budget with no room for fun.This will lead you to feeling like all you are doing is working to pay bills.This will lead you to not being able to stick to your budget each month!You will consistently feel frustrated, exhausted and overwhelmed!
How to Plan for Next Month:
It is time to take a serious and hard look at your living expenses and how you are defining necessity.What item or items in this category are costing you too much and preventing you from having financial freedom?Is it time to reconsider your monthly car payment or your house payment?This may not be a change that can be made in 1 day, 1 week or even 1 month, but if you do not have sufficient discretionary income something in this category needs to go!
Perhaps your necessities are at a reasonable level and what is preventing you from having discretionary income is your debt payments.Are you putting too much of your monthly cash flow towards paying down your debt and not leaving enough for living today?Are your minimum payments so high and suffocating all the cash flow out of your life?If you do not have enough money going towards personal spending as you do for debt this category needs to be re-evaluated.What options do you have to make a better allocation of funds?How can you pay down your debt and still have money for today?
Budgeting can be tricky and these 3 steps identify some hard questions and decisions you may need to make about your finances, but I am here to help! I can help you break this down and simplify your finances. I can help you identify your problem areas and determine your options so you know what your next step is!
I take live Question and Answer on Facebook each Wednesday at 3pm on my Facebook Page. Feel free to post a question on my page or send me an email then join me live each Wednesday to get the answer to your financial questions!
If you still need more support on starting your budget for 2018 leave me a comment or send me an email at Katie@MonarchFinancialCoaching.com!