4 reasons why I see budgets fail as a financial planner

When you buy through our links, Insider may earn an affiliate commission. Learn more.

Have you ever set a budget but had trouble sticking to it on time? Have you and your partner ever argued about spending? Have you ever felt like random bills and expenses are pulling you out of your budget despite your best efforts? If so, you are not alone.

Here are the most common reasons I’ve seen budgets fail and what I suggest instead.

1. You are making a budget without clear objectives

A budget is designed to help you spend less than you earn and find dollars you can use to further your goals. Whether you’re working to pay off debt, build an emergency fund, invest for retirement, or save for a home, having clarity about your goals allows you to connect daily budgeting to what you can achieve in the long term.

For example, budgeting because you feel like you should spend less is very different from budgeting because you want to buy a house in two years and you know that sticking to your budget is what will get you there.

2. You forget to budget for non-monthly expenses

Non-monthly expenses are things you don’t pay monthly, including

Car insurance

premiums, property taxes, vacations, and vacation expenses. Since most of us think about making a monthly budget, it’s easy to forget about expenses that don’t happen monthly. But for your budget to work over time, it’s critical to plan for monthly and non-monthly expenses. It’s so important, in fact, that companies like Monarch Money, Mint, and You Need a Budget are working on ways to help users incorporate non-monthly expenses into their monthly budgets.

To plan your non-monthly expenses, take a few minutes to add up all the non-monthly expenses you anticipate for the coming year. Then divide that total by 12 and transfer that amount to a separate non-monthly savings account. When a non-monthly expense comes up, use cash from your non-monthly savings account to cover the cost.

3. You’re not budgeting for fun

Although most of my role as a financial planner is helping clients achieve their goals, I also strongly encourage clients to create a budget that allows them to enjoy life on the go. I find that clients are more successful and happier when they strike the right balance between the two. Balancing spending and saving is the key to sustainable progress over time.

For some customers, adding “fun” as a line item in their monthly budget gives them the freedom to spend a little more on whatever brings them joy each month. For others, setting aside a portion of their bonus and principal compensation payments for “fun” helps them enjoy life and celebrate their windfall. And some customers just like to have a little extra wiggle room in their entertainment or dining budget so they have some flexibility to have fun. Different approaches work for different clients, but it’s important to find the approach that works for you and have a little fun.

4. You are on a different page than your partner

One of the most common areas where client couples disagree is over expenses. When customers are not on the same page with their partners, they often criticize each other’s spending habits. One of the most important things I do with clients is help them align on their financial goals so they feel like they’re on the same team working on shared goals. We also establish how much they need to spend monthly on their goals to make progress. Once they’re aligned on their goals and the amount of money they need from their budget to make progress, it’s much easier to resolve spending disagreements.

From there, we discuss the budget adjustments that need to be made to find the dollars for your shared goals and decide on the best account structure to support your spending. For example, some couples do better with

reviewing accounts

, while others do better with separate checking accounts, and still others prefer a combination of the two. Finally, we agree on a budgeting system, whether it’s an app, a spreadsheet, or even cash envelopes, that works for both partners.

Above all, know that budgeting takes practice and experimentation: if your budget isn’t working, explore ways to approach it differently to find a system that works. for you.

Add Comment