It’s been just a week into the month, and you can already see your monthly budget crumbling. Sounds familiar? Well you are not alone, as more than 82% of traditional budgets fail for one or the other reason. Some of the common reasons/flaws that are responsible for the failure of traditional budgets.
1.) Unrealistic Expectations – One of the primary reasons why traditional budgets fail is because they are set on unrealistic grounds. It can be quite uplifting to think about saving money by drastically cutting down on your miscellaneous expenditures such as eating out, going for movies, outing with friends etc, but is it really practical? Is it possible for you to suddenly cut down your expenditure from 40% to ‘0’?
It is important to be very practical while drafting your budget. If you want to save money and cut down on certain expenses, do that in a logical and realistic way. Try minimizing your expenses slowly each month, till you can get it to an optimal level.
2.) Update your Budget – Another flaw in the traditional budgeting process is that it is not dynamic in nature, and does not change according to the circumstances or needs. Life can be quite unpredictable and it is important that your budget is in line with your current and future needs. To achieve this, you will need to update your budget each month.
Certain expenses such as insurance costs, car repairs, medicals bills etc, are spread out throughout the year. Accounting for each and every dollar you spend or plan to spend in a month is crucial for creating a successful budget.
3.) Following an “Ideal Budget” Plan – Traditional budgets are based on ‘one size fits all’ concept, which is probably another reason why they do not work. Your budget should be solely based on your lifestyle, needs, preferences, earnings and expectations.
Determine the amount of money you would need for different expenses throughout the month (essential and non-essential both), and sketch a budget that caters to these needs. An ideal budget plan is not the one that worked for the global economy, but the one that works for you.
4.) Improper Tracking – Have you ever lost track of your expenses, wondering how much you spent on shopping or eating out? If you tend to make multiple transactions throughout the day, then it can be hard to keep track of all of those expenses.
A smart strategy would be to track what you spend daily, where you note down each and every expense, even the smallest ones. This is a good way to track your expenditure, and will make it easier to accurately compare your actual expenditure with your budget. For an quick & easy way to do this, check out our budget tool, Spendtracker
5.) Take everyone’s Approval - Traditional budgets are similar to dictatorship, one person decides what is best for everyone else. But this does not work when you are a part of a family, as the needs of other members (your spouse, kids or parents) are also equally important. Either sit with your family and draft a budget for the month, or design a preliminary budget and present it to the family. Be prepared to explain/justify your budget decisions, and why it is necessary or in everyone’s best interest.
Don’t be frustrated with failure – it is common for your budget to get off-track occasionally. Rather than blaming yourself for making mistakes, examine why your budget failed and try to take corrective measures for it.