Every month you wonder why you’ve gone over budget and have a hard time understanding what you did wrong. You’ve made a conscious effort to stick to your allotted budget, but as you look at your credit card bills and pay your monthly expenses, you don’t know where you’ve gone off track.
If that sounds like you, you’re not alone. In a recent survey conducted by Intuit, nearly 65 percent of Americans had no idea where they spent their money last month. And nearly a third wished they had spent less in the previous month.
Want to start the new year with a renewed commitment to getting your budget to work and get set with your savings and spending? Check out these five tips from finance experts on why your budget isn’t working — and find out practical ways to get back on track.
You aren’t tracking your dollars.
Creating a budget isn’t enough. “It’s one thing to set a budget and a whole other to actually stick to it,” financing and budgeting expert Andrea Woroch tells Apartment Therapy.
If you aren’t tracking your spending and paying attention to where your money is going, the details of your budget will continue to remain fuzzy. “How do you know you need to cut back on dining out or clothing if you have no idea how much you’ve spent towards those categories at any given time?” Woroch says. You could keep track of your expenses by writing them down, but a better alternative might be to use budgeting apps.
Woroch recommends Mint since it links all your financial accounts in one place so you can check on your spending and saving habits at any time. “It even categorizes your purchases so you can make adjustments to your spending throughout the month to help you stay on budget.”
You’re making too many big changes at once.
Don’t overwhelm yourself by making too many big changes at once. Evaluate your budget and determine where you can cut extra spending, but try to make these changes incrementally.
“Giving up all the things that bring you pleasure is going to make you feel deprived, and that can lead to burnout. It’s much easier to stick to a small-level change than a complete life overhaul, so take baby steps toward changing your spending habits,” says Woroch.
One approach is to take on one change in your budget every month. For example, “if you want to scale back on dining out, cut out just one to two meals per week until you get used to cooking at home and it becomes a habit,” says Woroch.
She recommends evaluating the purchases you make by comparing prices and looking for coupons and shopping secondhand. “You can even use digital tools that apply savings for you so you don’t have to think about it. For example, browser tools like Karma provide instant price comparison, and Cently applies coupons to your online cart automatically,” she says.
You are wasting money without realizing it.
Are you aware of every expense you’re making? If you aren’t, Woroch says, “it’s impossible to stick to your budget if you’re wasting money without realizing it.” She recommends reviewing all bills and looking for ways to plug budget leaks. For example, “switch to a lower-tiered data plan if you notice you’re using less than you’re paying for your wireless bill and cancel unused subscriptions and memberships.”
Another way to save money is to review insurance policies and look for potential savings and try to bundle homeowner and auto policies. “The extra money you free up on these necessities can go towards your debt or savings so you don’t have to cut out things like dinner with friends,” Woroch says.
Your budget is too complicated.
If you have way too many categories or are overcomplicating how you’re tracking your expenses, it might become too cumbersome to stay on task with your budget. Certified public accountant and tax strategist Paul Sundin says, “You don’t have to take note of each and every little thing that you buy. This type of detailed budget can become too time-consuming to maintain and you might end up neglecting it altogether eventually.”
Sundin suggests ball-parking or estimating the average of how much you spend on groceries, gas, and other daily expenses. “The key is to make a budget that is detailed enough to be useful,” says Sundin, but not so taxing that it becomes tedious.
You’re spending more than you earn.
This might be obvious, but it’s important to remember. No budget will succeed if your expenses exceed your revenue.
“You have to increase your income or decrease your expenses, or else you will be saddled with debt,” says Sundin. List your expenses and see what you can eliminate. “Finding another stream of income will help, but it’s more practical to cut back on spending rather than working extra to maintain more.”