Why Budgets Dont Work and How to Fix It

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By Terry Rigg

This article is for those families that have sat down at a desk or the kitchen table time after time trying to develop a family budget that they can live with.

Why don't they work?

There are several answers to that question. Most budgets are doomed from day one because they are too complicated, don't have the commitment of all involved or the numbers simply don't add up. The biggest culprit is that most people don't allow for unexpected expenses.

Let's tackle these one at a time:

Too Complicated: When you list every expense you have on your budget you set yourself up for defeat. Some budgets include such things as cleaning supplies, dog food, haircuts and car gas. In order to keep track of all of these you would need a new box of envelopes every month.

Answer: Streamline your budget. By simply including a topic on your budget entitled "Household" where you can include everything you spend money on each month, excluding bills. Groceries will undoubtedly be the largest expense in this category. By taking the extra time to figure what needs to go into your household budget when you set it up, you can save a lot of time each payday.




Commitment:

1. Many times the commitment to live by a budget is lacking.
2. People get into spending habits that are hard to break.
3. There is constant friction in the family over money.
4. It is more comfortable to live beyond your means.

Answer: You have to consider all of the above problems when setting up your budget. The Family Budget is just that, the FAMILY BUDGET. Everyone in the family that is old enough to count should be included. I don't mean to say that children should have a say in where the money goes, but they should be aware of what the spending limits of the family are. If you work closely with your spouse in developing a family budget you both are more likely to stick to it. There is one other detail that will help. By setting aside money for yourself and your spouse, that you don't have to account to the other for, your budget is more likely to succeed.

The Numbers Don't Add Up: You have more budget than you have paycheck. Generally, this is caused by not being realistic in your budget. You try to make your paycheck fit your budget.

Answer: Start by listing your household expenses and bills. Then include 10% of your income for long and short term savings. If this total is more than your paycheck, you have to cut back. Start by looking at your household budget. Are there items that you can do without? If you have money left over after considering all of the above, then increase your savings.

Unexpected Expenses: This can be from your car breaking down, need a new washer or any number of other expenses that you can't predict.

Answer: While long term savings is for things such as a home or car purchase or college for the kids, short term savings is just as vital to your financial security. A short term savings will accomplish two things. It will provide you with the money you need to pay those unexpected expenses and it will cut down on the use of credit cards. The short term savings could save you hundreds of dollars a year.

When you develop your budget, keep the following things in mind:

1. Make your budget a simple as possible
2. Get the family involved.
3. Make your budget fit your paycheck, not the other way around.
4. Plan for the unexpected.
5. Visit The Complete Budget and Bill Organizer for more details

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Terry Rigg is the author of Living Within Your Means - The Easy Way and editor of The FREE Budget Stretcher Newsletter and Budget Stretcher web site. He has 25 years of experience counseling individuals and families concerning their personal finances.