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Budget failure: Reasons why personal budgets fail

Updated on July 4, 2011
Budget failure can lead to money disappearing before you know it.
Budget failure can lead to money disappearing before you know it.

Budgeting is an integral activity in financial planning. After all, it clearly outlines how you plan to allocate your income for various needs.

Unfortunately, some persons who create budgets underestimate their value and importance – reducing it to an academic exercise.

This attitude towards budgeting is a primary reason for budget failure, which can occur during the process of creating the budget or when trying to implement it.

Financial indiscipline

Even if you have a good plan for allocating your income, if you do not stick to the plan, it would surely fail. Failure to adhere to a budget is a primary reason for its failure. If it is difficult to use the plan that you have created, it could suggest that the plan was not realistic or truly yours. However, bad habits (impulse buying and profligacy) combined with poor attitudes towards saving money are also likely culprits for those unable to stick to a budget.

Failure to link your budget with your financial goals

Budgeting is not an activity that should occur "just because". It should be a systematic approach to achieving financial goals. Closely associating your budget plan with financial goals provides ample motivation for persons to stick to the plan. Failure to link budgets and goals would make it an arbitrary and whimsical plan with no root in reality.

Unrealistic budgets

Financial goals and dreams should never be confused. Some persons use their budget to outline what they hope to do, not what they expect to do. They wish they could save $500.00 next month or that they could eliminate their credit card debt by next year. Just as goals should be realistic, measurable and achievable, so should your budget. After all, a budget is your roadmap to your dreams. However, if it represents what you wish for instead of what you expect to do, it will fail.

Not budgeting in the context of financial planning

Budgeting is one aspect of financial planning – part of a system. If you do not consider other activities and needs, your plan would be vulnerable to unexpected occurrences. This might occur even if you were disciplined in adhering to the budget. Budgeting is an activity that reinforces other aspects of financial planning. If the budget does not reinforce a financial plan that is structurally sound, it may fail along with the rest of the plan.

Not automating savings and payments

A budget should not be an event, but an ongoing process. This being the case, there may be times when we may lapse, err or omit. Automating a budget is a fine way to avoid lapses that can happen to the best of us. Failure to automate a budget it makes it that much harder to adhere to.

A successful budget is realistic, goal-based and exists in the context of a sound financial plan. Given life’s uncertainties and poor attitudes towards finances, it is easy to see why budgets fail more often than not. Still, acknowledging why they do and putting things in place to avoid them can lead you to your desired outcomes.


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  • SpiffyD profile image

    SpiffyD 6 years ago from The Caribbean

    Thanks Alocsin.

  • alocsin profile image

    alocsin 6 years ago from Orange County, CA

    These thoughts on why budgets fail make sense. Voting this Up and Useful.