The Biggest Reason Why Budgets Fail and the Easy Solution
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If you’re like most adults, you have a love-hate relationship with your budget. You love the hope and optimism your budget gives you at the start of the month, and you hate tallying up the numbers at the end of the month only to realize that you didn’t stick to your budget – again. It is a discouraging cycle, to say the least. And it causes many people to abandon budgeting once and for all and leaves them wondering why budgets fail.
The biggest reason why budgets fail isn’t just about numbers or behavior. Budgets don’t fail or succeed because you switched from Excel to paper-and-pencil. And they don’t fail because you missed a day recording purchases. The truth is that most budgets fail because you haven’t given yourself a good enough reason to follow it.
Examples of Why Budgets Fail So Easily
When many people set-up a budget for the first time, they follow a simple template or pattern their budget on an example they have seen. This practice makes sense, but it isn’t fail-proof.
Part of the reason why budgets fail is the fact that many people simply copy budget parameters without considering their own realistic circumstances. For example, if you use the popular app Every Dollar to create a budget, the app guides you to create your budget based upon the following recommended percentages:
These categories and recommended percentages are definitely a great starting point when building a budget, but blindly following them without considering the specifics of your situation can doom your budget to fail.
For example, maybe you aren’t big on recreational activities. Or maybe you work from home and don’t own a vehicle. In those cases, blindly allocating 5-15% of your total budgeted spending to those categories wouldn’t make realistic sense or add any value to your life. Failing to give each dollar a specific purpose in this manner is one example of why budgets fail.
A second example of common budget failure is setting unrealistic goals. For example, if you’re currently spending an average of $900 per month on groceries for two people, aiming to cut this spending down to $450 in one month isn’t very realistic. It would be much more sensible and achievable to gradually reduce the budget to $450 over the course of 3-4 months.
Similarly, a third reason why budgets fail so often lies in creating a budget that is too restrictive. When you create a budget, think of it less as a drill sergeant trying to inflict misery and more like a coach who is encouraging you to win. It’s much easier to follow a person, or in this case, a budget plan, when you know that it is leading you to where you’re trying to go.
Prevent Budget Failure By Creating a Values-Based Budget
If budgets fail because they blindly follow templates, set unrealistic goals, and tend to be too restrictive, how to create a budget to help you Take Back Control of Your Life and Money becomes clearer:
A successful budget is one which combines recommended percentages with your realistic circumstances and is designed to help you achieve the financial goals that you value the most.
If you’re going to create a budget that will succeed, you have to start with a vision of what financial success looks like to you! The best way to create this vision is by identifying your values.
Why are values the key to a successful budget? Your values are what are most important to you. When you identify your values, you realize the important reasons why you decided to create a budget in the first place.
Simply put, a budget without values sets empty, meaningless targets. If you don’t understand and feel the significance of your budget goals, you will not stay motivated to stick to your budget once the initial excitement wears off.
This is similar to filling a jar with coins for no specific reason.
Put another way: Values are the driving force for meaningful goals. Show me a significant goal, and I will point out the values that underpin the goal. Values are the reason that Michael Jordan became the greatest basketball player of all-time after getting cut from his high school team. His love for Competition and Accomplishment gave him all the fuel and motivation to stick to his goals, work hard, and become the best.
Again, the reason why budgets fail is because we haven’t given ourselves a good enough reason to follow them. Identifying your values and linking them to your budget solves the problem!
Stop Your Budget From Failing and Start Winning With Money Today!
I strongly believe that the reason why budgets fail is they focus too much on “how” to manage money responsibly and not enough on “why” it matters. A values-based budget can help you fix the problem.
If you’re ready to take the next step in fixing your budget problems by identifying your values, I’ve created a FREE printable resource to help you.
The MONEY VALUES TOOLKIT is designed to help you create a budget that is built on a foundation of your Values. It will help you
- Discover your Purpose and Values
- Review and improve your budget in light of your Values
- Create Values-based goals to stay on track with your budget
This 10 page guide is a great value, and again, it is FREE. Simply use the form above to become a FinanceSuperhero subscriber and you’ll receive an e-mail with instructions to download your printable PDF toolkit.