Newsfeed
Most people don’t budget their money. Or don’t follow their budget if they do put one together. Why is following a budget so hard? US News put together a list of 5 big reasons budgets fail. They are:
- Budgets restrict you: You want to be free! You don’t want anyone, or anything, telling you what you can and cannot buy. If that’s how you fell, then you need to come up with something that works for you. As we said in our article Controlling Your Money–if you don’t control your money, it will control you. And overspending, aka debt, will make you more miserable than living within a budget will.
- You lack financial education: Where do you learn personal finance from? Only 17 states currently require students at public high schools to take a personal finance class, a big increase from previous years. Children who aren’t taught how to budget become adults who don’t know how to budget. And that is why most just wing it. So what should you do? There are so many available resources out there that guide you step by step, you can find them online, in books, listening to radio shows, or buy software. Including our series Controlling Your Money Part 1 and Controlling Your Money Part 2. There are even free online college financial courses. From basic budgeting tips to more detailed financial literacy, find something that you think will work for you and that you will follow.
- You’re too emotional: From the US News article, “‘Budgets are made with logic. Purchase decisions are made with emotion. We buy things based on how we think they will make us feel. So budgets and spending are incompatible,” says a sympathetic Martin Hurlburt, the Salt Lake City co-founder of T.M. Wealth Management, which also has an office in New York City.” Figure out your money personality. No matter your emotions about money, you can budget successfully.
- You don’t think enough about the purchases you’re making: Think about how much you make per hour. If you earn $50,000 per year, that equates to roughly $25 an hour before taxes, assuming a 40 hour work week. So when you go to make a purchase, how many hours did you have to work to pay for it? The example they give in the article is spending $400 on a new smartphone. Is that smartphone worth two full 8-hour work days? Think in terms of the labor it takes to earn money.
- Your budget hasn’t yet given you a reason to follow it: Budgets that consistently fail are ones that aren’t specific or realistic. You’re more likely to follow it if you are trying to save money for a vacation, retirement, college, Christmas gifts, and so on. Don’t set vague, unreachable goals, which leads to giving up when you can’t achieve them. From the article: “In other words, if your budget were a person, would it be the president, or a football coach or maybe the captain of a ship? Or is your budget a shady looking fellow with body odor? All budgets attempt to be leaders. And if your budget is a good leader, you’ll want to follow it.”
For the full article from US News, click here.
