It’s a harsh reality that most people have experienced the arm-twisting of a failing budget, either due to unexpected expenses or poor financial discipline.
Locally, the public outcry about the current high cost of living has rendered many personal budgets impractical due to the high inflation rate.
Conversations about the future may raise questions like, “Is financial planning now a maybe? Is this the right time to start or stick to a budget?"
Yes, these are reasonable concerns but do note that you’re on the right path by having a budget: a roll-the-dice attitude is not how to get ahead, even when things get tough.
Your best bet is to start by defining a failing budget by looking into what a successful budget is as follows:-
A successful budget is a budget that works as a practical guide to your cash flow. It should be realistic, well planned, flexible, and clearly outlined; to adequately meet your plans.
A failing budget then is a budget that is not practical and does not serve to help you achieve your current and future financial goals and obligations.
Now, let's get into why a budget fails and how to revise a budget that is failing.
The meaning of emergency is relative to each person: yet all emergencies have one thing in common, there is no notice!
Despite this fact - this point is about the two ways a budgeting emergency plays out. Either you have no financial safety net in the event of emergencies, or your emergency fund cannot cover existing or possible emergencies.
These scenarios further derail your budget goals because they redirect funds from existing financial plans.
Here’s an example; say you lose your job, this would mean reduced or no income for an unknown time.
Consequently, you might have to take a loan to meet your fixed expenses such as rent and groceries and this will derail your savings and investment goals and increase your debt.
Understandably, by the very definition of an emergency - it may seem impossible to plan for the unexpected.
However, there are steps to make sure you have a financial safety net by setting up an emergency fund that is realistic to your financial situation.
Below are the key things to keep in mind:-
Did you know that inflation not only leads to goods and services price increase, but it also lowers purchasing power and reduces the value of savings, over time?
Understandably, where inflation is the “budget villain,” it’s not your fault; however, it is your responsibility to make sure it doesn’t destabilise your financial goals.
Planning for the effects of inflation is a great way to cushion yourself. You, for example, want to choose a savings account that offers an interest rate higher than the previous year’s annual inflation rate.
The same goes for any investments you choose to put your money in, including the money market funds, real estate or stock market.
Then there is the very necessary need to readjust your budget to reflect the prevailing inflationary disruptions. While your rent will typically not be affected by inflation immediately, the cost of food, everyday expenses including even entertainment and leisure will.
Here is where the 50/30/20 budgeting rule can come in handy. The idea is to never be unable to afford your needs but also continue saving up for your financial goals, which means the 20% for wants may need to be moved around between needs and savings.
Learn more about the 50/30/20 budgeting rule here.
Budgeting may feel like a dull and discouraging task, like most essential tasks in life.
I have a hack to get through my budgeting to-dos. I think, or sometimes shout out this phrase to keep me focused and motivated, "Budgeting isn't about limiting myself; it's about making the things that I enjoy possible".
With this phrase in mind, it makes it easier to identify if your budget is unrealistic.
Next, look out for whether these two budget features exist.
If your budget doesn’t have one or both of these features, take the time to rethink it and include them.
Set realistic amounts for each item on your budget and evaluate your ability to follow through with the changes.
Take it a day at a time. You won't change overnight, so give yourself at least a few months to get used to your budget. Be patient and stick to your new budget.
Focus on not getting stuck in negative self-talk when unsuccessful; get back to trying until you get used to your new budget.
“I believe that through knowledge and discipline, financial peace is possible for all of us.”
Even as the good book says My people are destroyed for lack of knowledge, ignorance is the biggest enemy to financial progress. You may be surprised by how unaware you may be of the debilitating financial habits even though you are earning and spending your own money.
One of the best ways to get in touch with your financial habits is to do a complete financial self audit every few months. The first audit of your finances is to do it honestly and make it as detailed as possible. This will bring forth the habits that may be bleeding you dry and those that have a positive effect on your financial health.
Learn more: How to do a complete financial self-audit
It is advisable to consider getting the help of a financial counsellor or advisor to truly identify your most natural financial habits and come up with a plan on how to overcome them.
They can expertly identify your financial strengths, challenges and triggers to guide you towards creating, revising and sticking to a realistic budget.
“The people we spend time with influence our spending habits for better or worse”
Financial experts warn that if those closest to you aren’t on board with your budget strategy, you are likely to have a tough time sticking to a budget.
There are many situations where a shared budget is in play, and the efforts of all persons involved dictate the success of budget goals.
However, before we dive into how this point is a reason for a budget to fail, below are examples where shared budget efforts apply:-
When dealing with such situations, you may favour the idea to cut people off. However, this is counterproductive and only serves to cause financial stress.
To start, identify the uncooperative person(s) before sharing any budgeting plans. Here's how to go about it.
When you are transparent and communicate clearly, you encourage those involved to proactively contribute towards better budget control, even in unexpected instances.
Though budgets can be tricky to navigate, it is a necessary yet beneficial financial tool that keeps on giving.
Budgeting is a proactive exercise to help you optimise all that your money can do for a better and more balanced lifestyle.
So, if after reading this you’re asking yourself whether it’s too late to fix your budget, the good news is that it’s never too late.
Keep your budget goals in mind, and soon you’ll get into the rhythm of your amended budget.
"A person either disciplines his finances or his finances disciplines him."