Did you hear the word “budget” and almost stop reading? The “B” word makes many people cringe. Have you tried to budget in the past, only to toss your budget in the shredder when a big expense came up that wasn’t part of your plan?

Well, buckle in and get ready for some tips on how to build a budget that works! For real. When done correctly, not only does a budget reduce your financial stress, it supports you to reach your financial goals and dreams.

Let’s break down the three main reasons your budget isn’t working.

#1—You have a budget, but you don’t have systems in place to help you stay on track. 

Congratulations, you’ve made a budget. Unfortunately, you don’t actually look at it or track anything to know if you are sticking to the plan. It’s like getting a program from a personal trainer but never getting off the couch—it won’t actually help you.

Solution: Figure out what system(s) will help you to stay on track. There is no cookie-cutter method that works for everyone, but there are a lot of options. Cash envelopes, tracking apps and spreadsheets, to name a few. Using cash for variable spending, automating savings, and mapping out a plan for income before it comes in are the systems that have been most effective for my one-on-one clients.

Tip: If you try something and it doesn’t work, tweak it or try something completely different, rather than abandoning your budget altogether.

#2 – Your budget doesn’t include the unexpected.

You’ve included your rent or mortgage payment, your utilities, groceries and your automobile fuel and insurance. You’re not missing anything…or are you?

Enter what I like to call whammy expenses. These are the expenses that feel like a punch in the gut. They come into our lives and derail our budgets. Whammy expenses are unavoidable and when they hit, they hit hard. This type of expenditure is often unpredictable and usually inevitable. Think back to your last whammy expense—what was it, how did it make you feel? Car repairs, large-appliance failure and veterinarian bills are some of the frequent fliers in this category.

Solution: Take a step back and think of the big picture. What whammy expenses have hit you in the last year or two? Make a list of everything you can think of that falls into this category, then estimate how much it costs per year. Divide the annual expense estimates by 12 to determine a monthly amount to save. If you are paid bi-weekly, divide by 26 to save a smaller amount from each pay.

Listing everything in this category that you ‘should’ start saving for can feel overwhelming. I don’t want that to hold you back. Pick the item that stressed you out the most and start saving for it first.

Tip: Having separate bank accounts with custom names lets you see how much you have saved for each category. Once you’re a veteran at saving regularly, having separate accounts will help you see when adjustments are needed. If something unexpected comes up, adjust your plan.

For my fellow Canadians, Tangerine is what my household uses for our savings accounts. For my American neighbours, Capital One 360 has been recommended to me.

#3 – You think having a budget is all about restriction and you don’t include things you love in your plan.

This is where I see so many people go wrong. Restriction often leads to resentment and retaliation. For example, you love going out to lunch with a friend, but your budget doesn’t allow for that. You’ll probably stick to the plan for a while, then go out for lunch with a different friend every day of the week and blow your budget out of the water. Think about a diet where you can never have what you love—for me, that is chocolate—you’ll eventually miss it so much, you’ll binge and eat chocolate for breakfast, lunch and dinner. Having blown the diet, you may quit it altogether. The same could happen with your budget.

Solution: Include some fun money in your budget. It doesn’t have to be a lot, it could be $20 every other week. Just a little something so that you don’t feel completely restricted. This is something my husband and I have done for as long as I can remember. We can each do whatever we want with our fun money, no questions asked. This allowance enables us to do things we enjoy without stealing from other areas of our budget.

Tip: Using cash for this category helps keep things really simple. It also makes it very easy to see when you’re almost out of funds. When you use cash, you spend differently. You prioritize your spending because physically opening your wallet and taking the cash out registers differently in the brain than paying with plastic.

The truth is, no plan is perfect from the start. You have to jump in, try it out and adjust as you go. Don’t abandon your budget altogether if something doesn’t work. Challenge yourself to think outside of the box and come up with a solution. Give yourself grace and understand that a short-term budget fail isn’t truly a fail, it is you learning and taking control of your money.

If any or all of the above makes you feel overwhelmed, but what you’re doing right now isn’t working, it could be time to reach out for help. Together, we can build a workable plan that is customized to you.

Feel free to check out the options on my website www.moneymindsetfc.com

If you have any questions, I can be reached at sherry@moneymindsetfc.com

Happy budgeting! 

-Sherry