How to Stay—Not Stray—On Budget
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The ‘B’ word is one of the most dreaded words in financial management. But without a budget, “people have no idea where their money is going,” says Dana S. Branham, a financial advisor with Lasting Legacy Wealth Management based in Lexington, Kentucky. 

Even if you have more than enough disposable income, if you know that you’re blowing $1,000 a year at the casino, you can better direct that money toward a financial goal, such as retirement, a college fund or even a trip to Paris.

Don’t worry if you’ve found it hard to keep a budget in the past. Read on for some common reasons budgets fail and a fix so you can turn things around.

REASON ONE: You have no idea how much things really cost. We all know what we’re spending to make our car payment or pay the cell phone bill. What we don’t know is how much we’re spending on day-to-day expenses like groceries and dry cleaning services. “One area that I think everybody underestimates is food,” says Branham. Prices change, and your budget must keep up with inflation.

Budget fix: Track your expenses (and write them down) for a month or two so you know what your day to day expenses really cost.  Make sure your budget reflects today’s prices.

REASON TWO: The budget is not realistic. Some of us make our budgets so tight in the name of saving that they’re impossible to keep. Budgeting $250 for groceries for a family of four is not only unrealistic, but it’s setting you up to fail.

Budget fix: Again, tracking your expenses gives you an idea of what’s possible.  When you see your weekly spending in writing, you can determine whether your savings goals can be met.

REASON THREE: The budget doesn’t take your wants into consideration. Another mistake people make is creating a budget that has no room for things they want. “I don’t think anyone should go to work every day and not ever enjoy their money,” Branham says. When we feel like we’re depriving ourselves, we rebel and blow our budgets in frustration.

Budget fix: Not only should you budget for retirement, tithing/giving, and an emergency fund, but you should create savings goals within your budget for things you want such as a vacation or a new purse. By saving bit by bit for such luxuries, we’re less likely to impulsively splurge. 

REASON FOUR: The budget doesn’t change with the times.  You must check your budget frequently in order for it to be effective. Not only do prices change, but our expenses may change based on what’s going on in our lives.

Budget fix: Each month, compare your budget to your actual expenses, Branham says. The goal is not to beat yourself up, but rather to see where you fell short so you can make adjustments in the future.

REASON FIVE: We’re not budgeting for the unexpected. Emergencies will happen. Cars will need new tires. Appliances will break down. Then there are the ‘happy’ occasions that come seemingly out of the blue such as your best friend’s wedding or a retirement party for your aunt.

Budget fix: By budgeting money to stock your emergency fund (strive for 3 to 6 months of expenses), you’ll have money for repairs and minor setbacks. Also, analyze last year’s spending to identify non-monthly expenses such as your AAA bill or the vet bill. Divide last year’s spending on those items by 12 and budget that amount each month so you’ll be prepared when those bills come due again.