The Top 5 Reasons You Blow Your Budget

Well, we have not been doing that well with this months budget. It got me thinking about what it is that makes people, us included, overspend. So, I came up with this list of The Top 5 Reasons You Blow Your Budget:

5. Overly Aggressive (unrealistic) Budgeting
You are so determined to pay off all your debts as soon as possible that you set unrealistic expectations that are almost impossible to achieve. At the beginning of the month you are sure you can limit your grocery budget to $200 for the whole month, but once you are in the store you are unable to stick to the unrealistic figures you set for yourself.

The reason this one can be such a problem is that there is a fine line between being aggressive, which is good, and being unrealistic, which is not good. We hear Dave Ramsey tell us "beans and rice and rice and beans" and we get so excited that we cut our grocery budget to a small percentage of the usual figure. If a category was over inflated to begin with, you might be able to reach your goal. But if your usual amount was reasonable, you might be setting yourself up for failure.

The solution: is to set realistic budget goals. One way to do this is to try reducing the amount of a category by a small percentage each month. If you are successful in reducing a category by 10% one month, try going another 10% the next month. This will work much better than going for a 30% reduction immediately. You'll eventually find what is a realistic figure for each category of your budget.

4. Failure To Plan Ahead
Not planning ahead is a sure fire budget buster. You do the initial planning when you write out the actual budget, but many people stop planning after this. Big mistake! You need constant planning in order to successfully stick to a budget.

If you are out for a long day of doing errands with the kids and you haven't budgeted any money for lunch or snacks, you'll be tempted to go through the drive-thru and blow your budget if you don't plan ahead and pack some food from home to to bring with you.

The solution: is to spend some time every morning planning out your day. With a little forethought you'll find it much easier to stick to the budget.

3. Not Getting "Budget Buy In" From Your Spouse
If your spouse is not on board with your financial plan, it will be almost impossible to stick to your budget. Your left hand might be undoing all the good that your right hand is doing. Any purchases that have not been agreed upon in advance will ruin your budget.

The solution: is to have a budget meeting with your spouse. If he (or she) is reluctant, let him know that this is a very important issue to you. (If he is still reluctant, you have more than a budget problem, you have a marriage problem.) Before the meeting, prepare a simple hand written budget (no elaborate spreadsheets!) for him to review. Let him know that you want and need his input. Let him know that you will revise any category that he wants but that after the meeting all spending must be in accordance with the budget unless you both mutually agree to make a budget change.

2. Failure to Track Expenses
In order to have any chance at staying within your budget, you must track your expenses during the month. Not paying attention is a sure fire way to blow the budget. You may think you haven't spent much dining out this month and decide to go to a restaurant again, only to later find that you reached your dining out budget cap two weeks ago.

The solution: is to track all of your expenses. It doesn't matter if you do this in Quicken or on a little notebook that you carry in your pocket, but it is absolutely necessary to track your expenses during the month to ensure that you stay under the limits you set. Another good way to do this is to use the cash envelope system. Put cash in an envelope and label it with one of your budget categoris (like "dining out"). When there is no more cash in the envelope, you know that you have reached your limit for that category.

1. Failure To Delay Gratification
The number one reason that people blow their budget is that they give in to the desire for instant gratification. Becoming debt free or having a comfortable retirement are great goals, but they take time to achieve. We want what we want and we want it now. It is hard to wait. We work hard. We deserve to have fun now. These are the thoughts we have when we rationalize overspending. Delaying gratification is hard. Giving in to what we want now is easy.

The solution: is to remind yourself that you are a grown up! Instant gratification is a childlike behavior.

Try to avoid advertising whenever possible. Marketing executives work very hard to make you want their products! Try to shop with a list and stick to it!

Practice delayed gratification (sticking to your budget) and it will get easier! (At least that's what I keep telling myself!)