3 Reasons Your Budget is Failing

by Miranda Marquit · 0 comments

We all know that one of the cornerstones of financial success is having a plan for our money. Even if you think you are doing it right, and managing the basics like you should, the reality is that you can still fail financially.

The reasons have a lot to do with your mindset and the ways that we trip up and spend too much. A recent article from The Wall Street Journal offers some insight into the reasons that your budget might be failing — even if you do everything right:

1. Not Giving Future Expenses Enough Weight

According to the article, most of us are good about estimating future income. We have a good handle on what might be coming in. What we fail to do is accurately estimate future expenses. We don’t adequately plan for future expenses — especially unexpected expenses. We don’t think about our outflows, and that can skew the financial plan and lead to problems. You spend more now, thinking that you have adequately prepared because you don’t give enough weight to future costs. When the future does arrive, you discover that your planning hasn’t been enough and you wind up in trouble.

2. Spending Money to Reward Yourself

We always hear about how we should reward ourselves when we reach certain goals. Hitting milestones should give us something to celebrate. While rewards can be one way to motivate you to save more, or plan for retirement, or do any number of positive things, the problem is that too often the reward involves spending money.

According The Wall Street Journal, this is a path that can lead to financial problems. First of all, spending money as a reward means that you are diluting the impact of your good financial decisions. The other problem is that when we feel good, it’s easier to spend more than we had planned. So you might go overboard and spend more than you expected for your reward.

Instead of rewarding yourself by spending money, think of other rewards that could be helpful. Maybe taking an afternoon to relax can be a reward. I’ve started rewarding myself with alternatives, such as going on a hike instead of staying home. Or, I’ll give myself an extra hour of reading or make an extra phone call to a friend to chat. This provides me with an extra treat during the day, but it doesn’t require me to spend money.

3. Letting Your Good Behaviors Lead to Overconfidence

Finally, another reason your budget might be failing is due to your overconfidence. The article points out that you feel financially responsible when you are saving money and taking other actions you know you should. Your good behaviors lead to an overconfidence about your situation. You might spend more than expected because you think you are in a good place to “afford” it when you really can’t.

Another difficulty comes when you are so bent on keeping your savings high that you borrow for big purchases because you don’t want to draw down your savings. You might use credit cards to excess, and run into problems later.

Be careful about the way you manage your money, no matter the situation. Stay in check and make sure your budget really is working for you.

Bonus Tip:

Another way to save on your monthly Internet and TV costs is to find a current ATT U-Verse coupon code or at least a promotion to knock down your home service bill.

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