Your finances feel out of control. Every month, something comes up. You keep spending more than you make. Chances are, it’s because your budget sucks. But don’t worry–mine did, too, and that’s why I decided to write a troubleshooting guide on how to fix a crappy budget.
I’ve spent the past few weeks thinking of some of the most common budgeting mistakes and, more importantly, how to fix them. What started out as a blog post became a huge guide to troubleshooting your budget.
Problem #1: I Can’t Stick to My Budget
You’ve crunched the numbers. You’ve got all your spending categorized: bills, rent, restaurants–the whole nine yards. Everything looks excellent. Now all you need to do is spend accordingly. Easy enough, right? Yet every month, you’re over budget. What gives?
Possible Solution: Budget for Irregular Expenses. Is the problem that something “comes up” every month?
One month it’s a higher-than-usual electric bill. Another month your cat needs butt surgery. The month after that, it’s your friend’s birthday, and she wants to go to Vegas.
Here’s the thing: something comes up every month, so you might as well budget for it.
Personally, I have an “Everything Else” budget dedicated to expenses like these. I set aside a few hundred bucks a month for those inevitable unplanned expenses that always come up. And if they don’t come up? Cool, I have more to save. You can actually see a lot of “unexpected” expenses coming. Your car registration, for example: it’s not monthly, but it’s still a regular expense. When you budget, think beyond monthly: what quarterly, biannual, or even annual expenses do you have? Make room for them in your budget.
Possible Solution: Give Yourself Some Breathing Room. Are you stuck in a restrict/binge cycle?
The problem might be that your budget is too strict. This is what happened to me. After college, I hated being in debt, so I wanted to pay off my student loan as fast as possible. To do this, I made a budget that was tighter than a clam’s ass: no room for movies, beer with friends, or the occasional cheap pedi. My budget only included basic living necessities: rent, ramen, and gas. All extra money would go toward my debt payoff. This is what I told myself, at least. It didn’t work out.
Instead, whenever I’d buy the tiniest indulgence, a pack of gum or something, it would obliterate my budget. Or worse, I’d get so tired of restricting myself, I’d go on a complete binge-shopping spree, setting myself back months.
That’s what happens when you tell yourself you’ll spend zero on anything beyond basic necessities. You’re budgeting for a life that’s not based on reality. Instead, make your budget realistic so you can make your goals a reality, too.
Problem #2: I Get Bored With My Budget
You just read Total Money Makeover. Or maybe it was I Will Teach You to Be Rich. You got all excited about the principles of money management, decided to turn your financial life around, and spent hours creating the perfect budget.
Then it got old.
You got tired, tired of depriving yourself. Tired of giving up sushi night. Dammit, life is short–you want your sashimi. So you forget about your financial goals, like getting out of debt or buying a home someday. How are you ever going to save for a down payment if you keep getting distracted with tuna hand rolls and sake?
Possible Solution: Declare Your Goal. Do you have a reason to budget?
After getting out of debt, I repeatedly blew my budget and spent frivolously. The problem was, I didn’t have a concrete goal anymore, so I had no reason to budget, really. To combat this, I sat down and thought about the things I wanted to do in life. For example, I wanted to:
- Travel to Europe
- Move to a different state
- Quit my job and switch careers
Those things take money. So I crunched the numbers, figured out how much I’d need to travel to Europe (one goal at a time), then built a goal-focused budget. The 80/20 budget is perfect for creating a budget that’s focused on a financial milestone. It’s sort of like the 50/30/20 budget, with more emphasis on your goal. You put the same 20% toward your goal, and the rest of your money (80%) goes toward all other spending, discretionary or needs.
The bottom line: when you have a reason to budget, it’s a lot easier to keep your eye on the prize.
Problem #3: I Don’t Have Enough Money!
Let’s say your problem isn’t exactly a budgetary one. Maybe you’re just flat out broke, and you don’t have enough coming in to cover all of your expenses. Before anything, you want to make sure you take a long, hard look at each category of your budget and cut back mercilessly.
These useful guides will help you get started with cutting back on your budget:
- Save Money on Bills
- Save Money on Food
- Save Money on Entertainment
Assuming you’ve done that and you still can’t pay the bills, your solution is simple: you need more money. Funny how something so simple can seem so freaking impossible, right?
Most of us have had to deal with the problem of not having enough, and when you’re broke, you’ll want to focus on widening the space between your income and your spending. In the personal finance world, we call it “The Gap.”
When you pull from both sides–spending and income–you widen that space, meaning you have more money available to put toward your goals or just make ends meet.
Possible solution: Ask for a Raise. Are you being paid less than you’re worth?
Obviously, asking for a raise (and getting one) is much easier said than done. But ultimately, finding ways to earn more money will help widen that gap the most.
This might mean asking for a higher wage. One of my favorite tips for negotiating salary is to ask your boss for feedback a month before you ask for the raise. Feedback gives them a chance to tell you what you could (and maybe should) do better. It’s like asking for a roadmap to your raise. Plus, when it’s time to actually sit down and talk numbers, you’ve proven you care about being good at your job.
When you ask for feedback, you can share your own feedback, too, and let your employer know where you think you excel and where you think you could improve. Need a script to get started? Try something like:
Of course, you don’t want to ask for feedback and then ask for a raise the next day. That’s not exactly genuine, because you haven’t given yourself time to improve. You want to really consider what your employer says, put their feedback into practice, and think about what they’re getting out of the deal, too. Think of negotiating as “joint problem solving.” With this technique, when it’s time to ask, you’ve taken the initiative of solving their part of the problem.
Project CRediT sources data from Wealthy Genius including net worth, earnings, and various wealth statistics.