5 Reasons Why Your Financial Plan Isn’t Working and the 5 Ways to Fix It
In simple terms, a financial plan is an estimate of how much money you plan to spend versus your income over a set period of time. Creating a budget is a fairly simple process, but making it work isn’t easy.
Many people end up complaining about their budgets, claiming that it’s too much work or a waste of time. However, this is most often a result of a budget that does not fit the user’s individual needs and desires. If you find yourself running out of money before the end of the month even after creating a budget, take a look at these five common reasons why your budget may not be working and how you can get it back on track.
1. You’re Forgetting the Little Things
It’s easy to forget that small expenses add up over time. For your budget to work, you have to plan nearly every expense that could come up in a given month - even minuscule purchases like new light bulbs or a pair of socks. Moreover, there are larger irregular expenses that could have an impact on your budget; don’t forget about things like home maintenance, car repair, irregular bills, or birthday gifts.
2. You’re Not Being Realistic
Most budgets are created with the best of intentions, but sometimes our intentions are too unrealistic. We are inclined to think of a budget as an ideal scenario; instead, it should be created with a firm grasp on reality. If you love to cook but plan to spend only $150 per month on groceries, you may end up in a tight spot when you overspend. Remember - it’s better to overestimate your expenses giving you more room to manoeuvre if you underspend.
3. You’re Not Prepared for the Unexpected
An emergency fund is critical for helping in situations of unplanned expenses. If you’re constantly spending your savings on unexpected expenses, your budget doesn’t have a chance to work. Set aside some money for a rainy day fund, and your budget will benefit in the long run. Of course, you must maintain the discipline to only use this money when you really need it!
4. You’re Not Cutting Back
For your budget to truly work, it’s important to cut back and occasionally say “no” to an expense. If you’re using up all of your income every month, it’s time to reevaluate your bills and work on your self-discipline. A gym membership that you barely use, premium cable services, eating out and entertainment are some areas for making cuts. Consider the differences between “needs” and “wants” and plan your spending accordingly.
5. You’re Not Tracking and Analyzing
There’s no reason to create a budget if you’re not going to keep track of it. Keep track of every dollar that you spend - once you see it in writing, you’ll realize just how much you’re spending on things like groceries and entertainment and how much money you can save by making cuts. Keep in mind - your financial situation is constantly changing. Therefore, your budget plan should be constantly adapted to match these changes.
How to Fix the Problems? Try Using a Budgeting App!
If you’ve tried and failed at making a budget, consider what might have gone wrong and give it another shot. Did you use a budgeting app? While there is nothing wrong with the traditional “pencil and paper” accounting method, budgeting apps offer a simpler and more intuitive method for tracking your finances.
Keeping track of your money doesn’t have to be hard, and apps like inBudget make sure that your accounting is easy. You can enjoy perfectly personalized budgets, keep track of your transactions with as much or as little detail as you want, organize your finances into a customized budget and even sync privately with family and colleagues or share your budget publicly with larger audiences.