It happens to the best of us. You want to spend your money wisely so you analyze, plan, create your budget and sit back all proud of your new financial plan. Surely the only thing standing between you and financial sanity was a solid budget!
Then the end of the month arrives and there’s nowhere near enough money in your account to cover all your bills.
Creating a budget is a very necessary step to achieving financial stability, but a budget without accountability means absolutely nothing.
For example, say your budget states you will spend no more than $100 on going out and drinking each month. Problem is, your friends really, really wanted to try out that brand new club downtown. And treating your besties to bottle service seemed like a really great idea after a few shots of tequila…
There’s your entire going out budget for the month blown in just one night!
This issue is not limited to just the party animals among us. The same issue can arise in almost any spending category if you’re not careful.
When you find yourself short on cash at the end of the month, take a quick look at the following areas to get your budget back on track.
1. Is your budget realistic?
I know you’ve spent time setting up your budget based on what you think you should be spending, but take another look. Start by thinking about how you live your life.
If you’ve spent every day of the past year going to Starbucks every morning for a coffee and then decided to cut yourself off to save money, great! If you continued to buy that coffee every morning after cutting it out of your budget because it’s truly part of your lifestyle, then not so great.
Be realistic with your budget. If you truly enjoy something and it enriches your life, even if it’s buying a cup of coffee every morning, then you need to find a way to make it fit in your budget. Otherwise, you will continue to spend money you don’t have and wind up with a $0 balance at the end of the month.
Perhaps you can modify your coffee habit just a little bit to make it more affordable, while still including it in your budget. Try going for a smaller size, a less expensive cafe or even opt to make it yourself at home.
I’ve found that slowly making small tweaks to your lifestyle is almost always longer-lasting (and therefore more effective) than huge changes. Those big changes appear to save you loads of money, but you can’t stick with them for long and end up wasting more money in the process.
When doing your budget and changing up your spending habits take it slowly and aim for little wins to ensure success.
2. Root out hidden expenses
You’ve checked out your budget categories and everything looks realistic – well done! Problem is, you still don’t know why your budget left you with no money in your bank account.
Your next step is to uncover any hidden expenses. These are common things that almost everyone forgets to budget for because they are not regular daily, weekly or monthly expenses.
Have a late fee on a credit card payment? Needed to buy a birthday present for Mom? Opted for an Uber instead of walking because it was raining?
All of these are perfect examples of things that almost no one budgets for. Again, take a moment to think about your lifestyle and any non-regular expenses you may have over the course of a year.
For example, if you drive regularly your car will eventually need an oil change or new wiper blades or new tires, etc. It’s much better to build the cost of those items into your monthly budget, even if they aren’t monthly expenses, rather than be surprised by the costs later on. Plus, by saving for them monthly, you’re less likely to feel a big burden when the expense does happen.
The way I handle non-regular expenses is to add up the total cost per year and then divide that number by 12 to get the monthly cost for my budget.
|Car Maintenance||Cost Per Instance||# Needed||Annual Cost||Monthly Cost|
I then set up separate savings accounts for each category (easily done with an online bank such as CapitalOne360, which even lets you create custom names for each account) and transfer the determined amount into the account at the end of each month.
Following the above example, I know I need to include at least $36.67 in my monthly budget for car maintenance to avoid surprises throughout the year. I had some room in my budget so I rounded this up to $40 monthly (just in case!) and make sure to transfer that $40 into my “Car Maintenance Savings” at the end of each month. Whenever I have to spend money on car maintenance I simply transfer the money back over to my checking account to cover the expense.
Believe me, it’s worth it to take some time to find your hidden expenses and plan for them!