The Biggest Dilemmas to Overcome When Making a Budget

Mention budget to most people, and they cringe or explain how much they h-a-t-e! budgeting.  Those people who realize having a budget is important may take the time to create a budget, but then they don’t follow it and continue to spend freely.  At the end of the month, they still aren’t sure where the money went, or even worse why there isn’t enough money at the end of the month to meet their financial obligations.

If you are one of the people who dislikes budgeting, examining the biggest dilemmas to overcome when making a budget can help you successfully manage your money.  Consider these typical budgeting problems:

  1. You haven’t set priorities.  Keeping a budget can feel like drudgery unless you are working for a goal.  Before you set your budget, think of what you want to accomplish financially in the next year, the next five years, and the next 20 years.  These priorities can help you determine how you want to utilize your money.
  2. You don’t have enough money.  This is a common problem, and there are two ways to overcome it: either make more money or cut your expenses.  Ideally a combination of both can help you balance income with spending.  There are plenty of ways to make extra money working from home, or you could ask for a raise at work.  Likewise, if you examine your expenses carefully you will likely find areas that can be reduced such as entertainment and insurance.
  3. Your expenses are not in proportion.  According to CNN Money, an ideal breakdown of monthly expenses is 30% to housing, 25% to taxes, 4% to insurance, 15% to savings and investments and 26% to living expenses.  If you have any categories that seriously deviate from these percentages, it may be time to make some hard changes.  For instance, if your housing expenses are 40 to 50% or more of your monthly income, you will likely have a very hard time making your budget balance and may need to think about moving or getting a roommate.
  4. You don’t have a realistic grasp of your expenses.  Before you set your budget, take the time to look over your spending for the last year.  Yes, it is time consuming, but you must know where you are currently before you can find ways to improve.
  5. You don’t keep track of how much you spend.  A budget tells you how you should be spending your money, but until you become very comfortable following your budget, you should keep track of how you spend your money.  Some people do this by using a credit card for every purchase so they know where they spent their money, others write everything down, and still others use a program like Pear Budget to keep track.  How you keep track doesn’t really matter.  What does matter is that you keep track.  You will find leaks in your spending as well as places where you really don’t need to spend money.

A budget doesn’t have to feel like drudgery; in fact it can be a powerful tool to help you reach your financial goals.  Take the time to eliminate some of the common obstacles to budgeting and in no time you will be on the path to achieve your financial plans.

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