Estimated reading time: 9 minutes
Learn from the experiences of successful individuals and understand why budget failure happens. Find out how to take control of your finances and avoid common pitfalls.
“Budget failure is your fault,” was the response from a successful friend when I asked him why failure rates were so high among some people who try to use a budget and then scrap the idea.
It may sound harsh, but coming from a guy who came from nothing and did anything he could to save money, it’s tough not to listen to his story.
I’m not so sure how much I agree with him, but to a certain extent, it’s not the budget that fails; it’s the operator of the budget and circumstances that surround it.
How To Dissect Your Money Situation
Unsurprisingly, some people have no problem spending more than they earn.
However, they are first to challenge why they can’t get a second job or earn extra income to pay down consumer debts.
Then again, anyone would agree that not much elbow grease is needed to spend money compared to earning it.
When Cindy shared her story about changing her life after turning to credit cards, she said, “It’s the one thing she wishes she had never done.”
Her most tremendous success was budgeting and finding a way to earn extra money working from home by making jewellery instead of giving up.
Resist Budget Failure
Budget failure scares us a bit, but we’re human and make mistakes like everyone else.
A positive spin to regard failure is to learn from our errors and try again without duplication.
Since we are both adamant about paying our bills on time and saving money for retirement, we must stay on top of our budget.
There are many ways to save money, and managing your own money is one of the most accessible ways of finding ways to save or areas to cut back on.
Last year, I wrote a post about seven top budgeting mistakes, and number one was “You don’t have a budget”.
That post is not only for people who budget but anyone who wants to learn how to budget but isn’t sure where to begin.
Giving Up Spending Freedom
Budgets can scare people because they believe a budget hinders their ability to “spend money” freely like they are used to.
They also believe that every penny has to be accounted for as if they were in money jail.
It’s not a smart way to consider money, but if a budget helps control spending habits, it can’t be so bad, right?
If blowing up your finances is a regular occurrence, then maybe a budget is ideal.
Budget Failure vs. The Learning Process
When we started our budgeting journey, it was the first time we had set up our Excel budget spreadsheet on the computer.
Budgeting had become a learning process, and we messed up, but we noticed the gains, even if small, that motivated us to stick to our plan.
We weren’t in significant debt when we began to budget aside from our mortgage.
Having little to no debt is not a get-out-of-budgeting ticket; quite the opposite.
We wanted to divide our income into categories to understand where our dollars were spent.
Answering the “why” question seemed easy, but it puts things into perspective once you think about it.
Understanding Your Financial Standpoint
Together, we created a list of reasons why we needed a zero-based budget and how to make one work.
As a couple who didn’t want money to ruin our relationship, we needed to ensure we were both on the right page.
For some couples, sitting down is probably the first barrier to overcome to get the budget rolling.
I always encourage couples to talk about money to understand each other’s feelings.
Before starting a budget, ask yourself this one question: Why do we want to budget if we don’t have the same feelings towards finance?
Without understanding where each other stands, you may end up on the side of budget failure.
A budget only works when everyone is involved with the process and commits to success.
Anger and raw emotions about budgeting where one partner doesn’t agree can bottleneck success.
You’re Not Cut Out For Budgeting
Unfortunately, not everyone is cut out for budgeting.
Some people try to run budget numbers in their heads, but they keep themselves afloat.
In other words, they budget with their mind instead of using a spreadsheet or budget binder.
I think the way someone tracks their money is their business.
However, I’m used to the budget sarcasm we get from some people.
I suggest anyone wanting to know their overall money situation should at least give budgeting a shot.
Financial Life Is A Business
Although a business budget is for a business, I often equate our finances with our “Life’s business,” which we certainly don’t want to see fail.
Some people survive financially even if they use the “I know how much money” we have to spend each money tactic or “We are good with our money,“ so we don’t need to know where the money goes as long as the bills are paid.
We did that, but we weren’t saving to the capacity we are today while using the budget, which made a massive difference to our overall net worth.
I also believe that some budgets work and aren’t quite suitable for specific individuals.
I have seen budgets that are way over the top for us, pulling more information than we would ever need.
Then there are easy budgets that didn’t entirely give us enough information.
We decided to learn how to prepare a budget to customize a budget template that made sense for us.
Do You Use A Budget?
Last week, I did a quick survey on Facebook, asking the fans one simple budget question.
- Do You Use A Budget?
Out of 18 responses, 11 fans said, “Yes, I/we always use a budget, four fans said, “No, I/we don’t use a budget,” and three fans said, “I don’t know how to use a budget” but want to learn how.
Jen a CBB fan who worked with me to prepare a budget for her family of 3 says, she can’t believe how much her life has changed since using a budget.
Budgeting Motivation Can Be A Waste Of Time
When someone tells me they don’t use a budget because they don’t make enough money, my spouse doesn’t want to, or they think the budget is a waste of time, it’s at that moment when I realize that nothing anyone says will change their minds.
Sometimes, it does take hitting rock bottom for someone to understand change is needed.
Budget failure is your fault when you set yourself up to fail before you have begun.
If you speak negatively about yourself or your skills and say you will never get any better, they are better than me, life sucks, and I’m no good at this, then you invite stress, jealousy, anger, and de-motivate yourself from sailing through tough times.
Please don’t give up on budgeting, get up and take charge.
After all, you are your boss regarding your finances.
Budget Failure Explained
Below are reasons why budget failure can happen.
- You view budgeting as a short-term plan rather than a lifelong journey.
- Failure to understand why you are budgeting.
- Giving up when you fail or make budget mistakes.
- You don’t take your budget seriously.
- Failure to work as a team.
- Negative talk about budgets.
- Failure to plan or set time aside to work on your budget.
- You believe that budgets are for people with debt or low-income earners.
- You guess at your numbers and don’t take time to research.
- Lack of motivation and abilities.
- Failure to ask for budget help.
- Unexpected lifestyle changes without modifying the budget.
- Creating unrealistic numbers sets you up for budget failure.
- You return to your old spending habits, putting wants ahead of needs.
When Life Throws Your Budget A Curveball
Where I don’t believe budget failure is our fault is when unexpected lifestyle changes take over our finances until someone can figure out a plan of action.
Some people have been injured on/off the job, diagnosed with illness or disease, job loss, etc.
Any of the above can severely impact a budget with no earlier sign that something will happen.
You could also find yourself as the caregiver for someone, and stepping aside from full-time employment to help your loved ones can also impact your budget.
Budget failure should not be considered a setback but an inspiration to try it all over again.
Don’t freak out if you make mistakes; learn from them and understand that we all make them.
It’s what we do with them that counts the most.
Having an emergency fund for these situations is imperative in budgeting.
Especially if you do not have insurance that covers you in a situation beyond your control.
Ex: work benefits insurance, auto insurance, life insurance, tenants insurance.
If you’re not budgeting, at least saving some money is better than having nothing saved.
Jobs Don’t Solve Financial Problems
Lifestyle changes can drastically affect anyone’s financial health.
Sometimes, telling a person to get a job is easier said than done.
Either way, finance takes a positive attitude, knowledge, dedication, and a desire to control the A to Z of budgeting.
Anyone needs to see their overall financial picture, whether working or not.
Only you can answer why your budget fails, especially when you’re the C.E.O.
Ideally, you’ll want to start with a simple budgeting system that works for you, which may mean asking for budget help.
A budget can’t solve all of your money problems.
However, it can give you hope that you are on the right track toward reaching your personal finance goals.
Discussion: What other reasons can you think of that budgets fail?
Please send your comments below!
Thanks for reading,
Mr. CBB
Well said Mr CBB!
Great post Mr. CBB. I’ve finally, got my budget in order using Mint and it’s been a big eye opener for me. I use to make a lot of the excuses that you mentioned above but more than that I’ve found whenever I made a budget that was to complicated I would tend to give up a lot quicker. With Mint it does a lot of the work for me. Also I feel working together as a couple helps the situation out a lot as well.
When I first setup my budget my wife was a little apprehensive about it since she felt as if I was only putting a budget together because she wasn’t paying the bills correctly, but after some long talks about our financial situation we were able to work through some of our differences. As a result our communication on our finances has helped us plan better and take a step in the right direction toward cleaning up our debts.
Good for you mate. It doesn’t matter what people use or what budget system they use to get the job done. As long as it works for you and it helps get you both to a comfortable place with your finances that’s all that matters. Cheers mate
“When people tell me they don’t use a budget because they don’t make enough money, my spouse doesn’t want to or they think it’s silly to budget and a waste of time it’s at that moment when I realize that nothing anyone says or does will change their minds.” Great point Mr. CBB. I could not agree more. I know for me the light bulb did not go on until I hit bottom and actually wanted to make a change. I was willing to try anything out and after a million start/stops I finally got it down.
Cheers John and I’m sure you can look back and wonder why it took you so long to get it right. It’s not that hard at all but it does take time and practice to get it right. The most important step is the first step and if one can’t get past that then they aren’t going any further. Cheers
We use a budget. It’s not a super strict budget and I don’t track pennies. Instead I know I want to spend max x amount this month. Our goal is to spend less than x. We also have a monthly savings goal we keep up with. Leftover money if any stays in the checking account.
It’s wise to look at your current expenses and find out what you can cut. Do you watch cable? No? Cut it? Can you lower your insurance? Yes? Do it.
MY next goal this month is to negotiate a lower car insurance rate. I am hoping I can cut $50-$100 every month of our monthly expenses.
Good for you and I like how you have goals to make cuts in your budget. The thing is there is no visual that you can even look back on over the months or years you then work with no data. The budget is like a bible about our finances or a diary for that matter. Sometimes we want to read back and see what life was like and how it changed moving forward. We can’t so that if we are guessing or just storing memories in our mind. Most of us would never remember numbers. I think as long as you are doing something it’s better than doing nothing at all. Most people I know get super excited once they “get” the budget and start adding in and tracking more numbers because now they really want to know more. That makes me happy!
Nice article Mr. CBB! You listed the main reasons why a budget fails and I think that the operator is the one that has the power to kill a budget. If you have changes to your life, then your budget needs to change. Many people keep static budgets, but shouldn’t they be fluid?
That is true and with those life changes once they sort the problem out then the budget should get sorted along with it, that is correct. Our budget has changed so many times that I’ve lost count.
I think you’ve covered them all! 🙂 I wrote a short post on this, but it didn’t cover nearly as much as your post did.
Thanks mate. I’ve been talking about budgets for over a year now and I’ve read and heard lots about why people do and don’t budget and their emotions towards them. I’m sure there is much more to add to this post but for the most part budget failure is not bad at all we just need to use the failures as a platform to learn what NOT to do the next time.
No one likes to fail and the word budget sends everyone into little seizure fits, but how many times do you begin something new and are perfect at it right from the start? It takes work just like everything else in life and is hardly ever instantly gratifying. You WILL make mistakes but it’s how you overcome them that speaks volumes of your character.
That’s true and if we learn from our mistakes and tackle it over again we likely won’t make the same mistakes if we understand why we made them in the first place. Cheers mate
I love your point about viewing your life as a business that you don’t want to see fail. Anyone who goes into business will read every book available and take every measure to account for every penny. When it comes to our own lives though that regimented discipline can easily go out of the window, yet when you think about it is anything more important than our own personal finances? Great post mate.
That’s exactly my point mate.. we put more effort into business than we do our own lives.
I can’t even tell you how many times I started and stopped doing a budget. I think for me I didn’t make it a priority and it’s almost like a hobby that falls by the wayside. It took a serious awakening to make me do it, but now it IS a habit that has kept me from getting in financial trouble.
It really does become part of our financial lifestyle where the numbers are very important. I actually enjoy seeing where we are doing well and where we need to improve. It’s certainly a big motivation for me.
Very good article and lots of food for thought here to digest.
I’m glad you liked it Christine.
In the past we’ve failed because we tried to set our numbers too low. We’d get discouraged and give up. I think it’s important to save money,but you can’t go from being a huge spender to spending almost nothing overnight. I think it helps to have goals and limits, but be able to change those if it doesn’t work.
Exactly the numbers have to be realistic and that’s where we can see some people fail or get discouraged.
I love budgets; they keep me sane. Plus, after I pay all the bills and set aside money for our goals and emergency fund – I get to play with the leftover fun money! 🙂 I hear many excuses as to why people don’t want to budget and mainly it evolves around their belief they will lose control of how they spend their money. I believe the exact opposite occurs. Now they finally GAIN control of how they use their money. They can see where it’s going and make adjustments if they see they’re spending too much in one area. Once they take care of all their obligations, they can use the remaining money on the things that matter most to them. I do think some people try to take on too much at once and create unrealistic budgets that they cannot meet, so they quit. Sometimes I think they do that on purpose too. We can be our own worst enemies, but thankfully, we don’t have to stay way – we can also be our own biggest champions. Great post, Mr CBB!
We felt the exact same thing as you. We felt more in control with the budget and making decisions to purchase something felt good as opposed to, can we afford it? We already know if we can and if there is money set aside in a specific category to make a purchase. It was the best thing we’ve ever done for our finances. Cheers mate!
I love what you said here about sitting down and working it out together if you have a significant other, and also, about your life being a business. So true! For me, my attempts to budget failed for years b/c I felt like I was in money jail, just like you mentioned. Once I worked hard at changing my perspective and teaching myself that a budget is not a curse, but a blessing toward a better future, I began to see budgeting for the gift that it is. And I’m here to say that a budget can help you out of just about any debt situation, no matter how deep. Cindy and Jen proved that too when they shared their stories. Great post, Mr. CBB!
Sometimes things just don’t go as planned. Failure ( ouch that is a strong word) is a great chance for me to see what happened and how I can prevent it in the future. Overage in a certain area, like food/groceries, gives me a chance to find new recipes using the ingredients I have on hand to trim it back for the next month. Great article!
Budgeting in general is used properly will give you the necessary data in order to make informed decisions about your money. If you fail, get back up again and fight!