Why Budgets Fail

Most budgets fail. Did you know that? In fact, budgets fail so often that many people give up and refuse to even think about creating a budget for their finances; it's just too much expended energy on something that always fails. So they give up. The problem is that most people give up before they try to figure out why their budget failed, which is really the key to finances. Unless you're a financial wizard with a degree in accounting and ten years' experience as a CPA, you probably won't get it right the first (or second...or third...) time. So let's take a look at why budgets fail.

Why Budgets Fail: You Don't Know What a Budget Really Is

This is by far the most common reason why budgets fail. To give you an example, my wife and I had three couples over for dinner one night a few weeks ago, and the conversation turned to finances. All of us at the table had children, and we were talking about the differences in our budgets since having kids. My wife and I were explaining the ins and outs of our budget, when one of the women at the table spoke up. She said, "You do all that work for your budget? Ours is much simpler."

"How does yours work?" I asked, thinking that if they had a faster and simpler way, I was going to switch to their budgeting solutions.

"We try not to spend money," was her reply.

Newsflash: that isn't a budget.  If your financial woes are solved by simply trying not to spend money, then I envy you - I really do - but it isn't logical. A budget consists of figuring out how much money your household brings in, then tailering your expenditures to fall within the perameters of that income. It might seem like a lot of work - it is - but that's what being a financially responsible adult is all about. If you don't know specifically how much money you can spend every month, chances are you're going to exceed your budget.

Consider visiting websites like bankrate.com and betterbudgeting.com to get a feel for how you should work your budget. Talk with others who have successful budgets and find out what you're doing wrong. If you don't understand exactly what a budget is, then your budget is probably going to fail.