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How you fail your budget and how you can fix it.

Updated on May 11, 2016

Budgets fail for a lot of reasons. In my post Your budget doesn’t work. Here’s how to make one that does I talk about several of the technical reasons they fail and how to create one that works. But sometimes the budget isn’t the reason it doesn’t work. Sometimes it’s the people side that causes the problem. Here are 7 key reasons people cause their budgets to fail and how to fix them.

Started on the wrong foot.

Most people don’t know where all their money goes. They think they know, but they don’t really. So when they try to create a budget the numbers don’t work out. Budgets only work if you start from the beginning and plan it right. Start with where you are. Track what you are currently spending for several months. Then estimate your budget based on what you are currently spending. After that, begin to refine your budget to meet your goals. Once you know where your money really is going, then you can refine where you want it to go in the future.

You simply don’t want to budget.

The classic budget works great for numbers people and people that like to track their money. If you love spreadsheets you’ll love budgets. However, not everyone wants to track every dollar they spend. Not everyone loves the idea of entering every cup of coffee into a spreadsheet. To a certain degree you have to be willing to do some of this to make a budget work. But there are a lot of ways to create budgets. Create one that works for you. One that you don’t mind doing. For some people putting cash in envelopes work best. Some people want the spreadsheet. Online tools like work great for others. There are a lot of creative ways to track and control your spending. You might even find yourself using a combination.

Not updating the budget.

Whatever method you use you have to keep it updated. This applies for both tracking your spending and making changes as your needs change. If the budget doesn’t meet your needs then it needs to be updated. If you aren’t tracking what you spend against your budget then you have no way to see where you are over spending or where you could spend some more. The most common reasons for not updating the budget is that either you don’t want to do it in the first place or the budget you have doesn’t work for you. The solution is to find a budget system that you like and are willing to use.

Your budget is too optimistic.

This is similar to going cold turkey. You have a great idea and a great goal. So you cut all of your frivolous spending and put it all to savings. Soon you can’t maintain that because it’s too much of a shift in life style. Instead of adapting the budget most people give up on the budget. The solution here is to look at how you are currently spending money. Then make small changes. Set intermediate goals that you can do. Update your goals regularly as you move toward your big goals. If you eat out every day it may not be practical to suddenly cut that to once a month. But you could cut back one day a week each week until you reach your goal of once a month.

Assuming an infinite miscellaneous category.

Unexpected expenses come up every month. I usually recommend that people have a line item called misc expenses in their budget to account for those things. This category shouldn’t make up a large portion of your spending. Most of your spending should be allocated to a specific line item. This allows you to see where your money is really going. If everything goes into this category then you need to reevaluate your budget.

Doesn’t match your values.

This may be the most important. Typically people know they need to save more and they hear that setting up a budget is a good way to do that. So they create a budget based on someone else’s template and don’t adapt it to their life style or their needs. However, if your budget doesn’t match your values you won’t want to continue it. For example if it’s important to you to donate money to a certain cause, put that in your budget. If you want to save for a new car, make sure your budget supports that. If you are a foody that loves trying new restaurants then put a line item in your budget for that. Make sure your budget accounts for the things that are truly meaningful in your life.


The responsibility is really yours and yours alone. Every time you spend your money you are deciding to spend it. Before you spend look at your budget. Think about your goals and values. Does this purchase bring you closer to your goals or does it take you further from them? Sometimes busting your budget is worth it. I recommend that when that happens you move the money around in your budget. That’ll help you decide where the money is coming from. It’ll also help make sure that future important things will be covered.

Budgets are an important part of financial planning. They are needed to plan and reach your financial goals. However if you don’t set one up that works for you then you will not keep up with it. If you don’t keep up with it then you’ll eventually give up completely. This can make it difficult to reach your financial goals. The bottom line is that budgets take planning. Find out what you spend your money on now then plan for how you are going to spend it in the future. Find a system that you’ll actually use. This may take some trial and error, but reaching your financial goals is worth the effort.

What method do you use to track your spending and create your budgets? Do you use online tools like, or manual tools like a spreadsheet? Any recommendations to everyone else?


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