Words: Chelsea Wright
Planning out and adhering to a strict financial plan can be intimidating- but it doesn’t have to be! This article tackles some of the most common budgeting challenges and how to overcome them quickly, efficiently, and successfully. Committing to working on these challenges is a great way to get your mental, physical, and emotional health in shape. Beat the stress with a solid plan using these tips.
If you’re regularly tossing and turning at night due to stress, you’re in good company.
About a third of Americans reported that they’re not getting enough sleep due to being worried about money. We all know how important sleep is to our overall quality of life. Unfortunately, most Americans may not understand the critical role a great budget can play in their lives.
I get it; sticking to a budget can be challenging, especially if you’re facing challenges that impact your ability to budget successfully, such as struggling to land consistent work or navigating self-employment. However, as complicated as budgeting may seem at first, it’s worth sticking with. Budgeting can help you create a plan to pay off your debt, save, invest and ultimately achieve your financial goals.
Feeling overwhelmed is common when budgeting. Two-thirds of Americans don’t have a budget, and many create one but have trouble sticking to it. With proper planning, you can identify your budgeting challenges, make a plan to overcome them, and reach your financial goals. Check out these common budgeting challenges and the steps you can take to tackle them below.
Budgeting Challenge 1: You Fear your Finances
Have you ever been afraid to log into your bank account or check your credit score? While money troubles are common, it doesn’t have to be the norm for your life. Facing your money troubles and coming to terms with mistakes you may be making can be scary. Still, money troubles never go away unless you take charge of them. Addressing money troubles means being honest with yourself about your current financial standing and committing to change for the better.
Before you can make significant changes to your spending or revise your budget, you’ll need to understand exactly where every dollar is going. Closely monitoring your finances for at least a month can help you better understand your spending habits and review whether they align with your financial goals. Using an expense tracking app such as Mint can help you track every dime. While tracking your spending, be sure to track your progress as well, to remind yourself of how far you’ve come on your budgeting journey.
Revisit your budget and expenses at the beginning of each month. Although your income may mostly remain the same from month to month, your costs may fluctuate. Be as prepared as possible for each expense by making a note of them in your budget. You can better understand how much to save that month and how much wiggle room you may or may not have for additional expenses.
Budgeting Challenge 2: Not Budgeting for Savings
What does your savings category look like on your budget? Does it exist? Try always to remember to “pay yourself first” when writing out your budget. Just as it’s a no-brainer to factor in money to pay your mortgage company, prioritize your savings— even if it’s only a small amount, every little bit counts.
When creating a plan for your savings, consider both long-term and short-term strategies. You can implement a long-term savings strategy by chipping away at debts and cutting down on household expenses. As for short-term strategies, eating at home more often and skipping a few outings with friends can help you tuck away more money.
If you find that cutting back alone isn’t working, sign up for automatic transfers from your checking to your savings. Manually transferring money from an account, you’re able to spend with your savings is no fun. Sometimes the thought of putting away a portion of our hard-earned money can cause us to overthink the process. Instead, consider setting up auto transfers with your bank or via a savings app so you can set and forget your savings.
Another area within a budget that may need an overhaul is the irregular expenses category. These are the curveballs that can throw off your budget big time. Irregular expenses that are commonly forgotten about are holiday spending, taxes, home or auto repairs, or non-covered medical needs—taking the time to account for these situations when budgeting can help you build a more solid financial future.
Budgeting Challenge 3: Being Vague About Your Financial Goals
Saving just to save may sound reasonable and responsible in theory, but you can quickly lose momentum without specific budgeting goals. To stay motivated to stick to your budget, get crystal clear about what you want to achieve.
A vague “I need to save more” won’t cut it. If you create a specific goal, you can budget around it and make sure you’re at least putting away that particular dollar amount needed to reach your destination in x amount of time.
A few areas to prioritize when revisiting your budget are:
- An emergency fund
- Buying a home
When we don’t have specific goals with the necessary dollar amounts and dates in mind, we can find ourselves impulse spending what’s left over after expenses. Review your budget and figure out how much you can realistically save each month for your specific life goals, no matter what other expenses might come up. Then tuck away the money into that specific fund before you make any non-essential purchases.
Budgeting Challenge 4: Impulse Buying
Trying not to shop is a lot like dieting; there’s temptation everywhere. One of the most challenging personal finance challenges to overcome is impulse buying.
In 2020 Americans increased their impulse buying by 18 percent, with most of their dollars going towards food, coffee, and alcohol. This is understandable; retail therapy may have helped some people cope with being at home and dealing with all changes over the last year. According to The Journal of Consumer Psychology, “retail therapy is proven to make people happier, as well as fight sadness and stress, especially in times of uncertainty.” Impulse buying may make us feel good now, but ask yourself- did having 100 extra rolls of toilet paper help you feel less sad last year?
Help curb your craving to make unplanned purchases by limiting your exposure to temptation as much as possible. Avoid window shopping, browsing online, and opt-out of emails and notifications from your favorite stores. Instead of spending on the fly, identify your needs vs. wants while budgeting. If there’s room after taking care of your needs, account for a small portion of your wants ahead of time as well. If you have a partner known for being a shopaholic, be sure to have regular budgeting discussions with them. Work to agree to stay on top of your finances together. Eventually, you may find fewer unexpected Amazon boxes on your doorstep.