You try to do the right thing. You create a financial plan and set up a budget to follow in your home budget software or budgeting spreadsheet. But it seems your budget still gets busted and it bugs the heck out of you! What keeps messing up your calculations?!? I’ll tell you what screws up your budget: L I F E.
L – Listed expenses get underestimated
You planned for everything you need to spend on but the amounts you planned just weren’t enough. For example: You didn’t realize you fill up the gas in the car a little more frequently that once a week; maybe its really every five days (not seven) so it throws your budget off.
I – Impulse buying
Every dollar is accounted for in your budget until you enter that store and walk out with something not budgeted. Oops. It happens to the best of us. But if you aren’t accounting for impulse purchases it’s going to throw off your budget. Either reign in your impulses or pad your budget by a bit for discretionary buys (stuff you buy when you want).
F – Forgotten bills
You thought you had all your expenses taken care of, then you get that department store credit card bill from the one time you used their card to get the extra bonus. Or you forgot to include your car insurance bill in your budget, which only comes twice a year. Or your drivers license is up for renewal after eight years (this one hit me recently). Be on the lookout for bills that are infrequent and make an effort to include them in your budget. Set up a reminder (like in Google Calendar) to include irregular bills if that helps.
E – Emergencies
You can’t plan for everything. Emergencies come up that eat into your budget. Make sure you have savings put away (emergency savings, yes?) so that you can cover the costs of emergencies. If you have to dip into credit you can find yourself paying off an emergency for months, if not years, to come.
LIFE, and life, will knock your budgets out of whack. Don’t let that discourage you from using a budget. A budget should be a fluid guideline that can change from month to month as your financial needs change. When you find yourself going over budget, make adjustments to future budgets and set up reminders for items that are irregular. As time goes on you will find that its easier to stay on budget.
This the most common problem with budgets working well. With a little adjusting of the amounts, it can work better. No budget works perfectly. I like that Impulse Buying and Forgotten Bills are a matter of behavior. Being organized will take care of them. Great post. Once you do your budget you won’t feel restricted but you will feel relieved about spending money. I do.
Budgets aren’t set it and forget it so much as set it and tweak it.
That’s so great. I think I used almost this exact line in my post today..life got in the way of my personal finance goals. But it was in a good way..new life and moving family closer to us. It doesn’t really fit into any of your 4 buckets, but I still got a giggle out of the post.
Good thoughts. What screws up my budget are the bigger expenses like travel (with the holiday season right now especially) that I knew I would have to pay for, but didn’t quite have enough cash in the account at the time. Also (and this is a mixed blessing), when I first started my job I would get all excited about investing, and moved over money into a brokerage but then realized I was very close to not being able to pay bills because of it 😉
Ouch. You have to make sure you have balance. I suppose investing too much can be like shopping too much if you aren’t covering all the necessary bases first.
Just had an emergency this week @ home that cost $180, lucky we had the $ in our emergency fund. 🙂
I always hate using the emergency find but I’m happy it’s there!
What has helped me most to deal with these issues is to have a list of LIFE stuff and save for it in my savings. I budget annually for expenses I know will come up – for example $1500 for car repairs, $2000 for Christmas, $1800 for vacations, etc. Whatever number is right for you. Then I save this amount ahead of time. It will eventually get spent during the year, but I cover for that by having $500 or so transferred from checking to savings and then I allocate it to whatver account is short on my LIFE list. This system has helped me to sleep much better at night – no worries that something is unaccounted for!
Sounds like a great plan!
You can use a sub-account in ING (or similar) and transfer a little bit every month and let it build to help grow the LIFE fund.
Thanks for sharing your technique!
Our budget is busted this month due to Black Friday. I planned not to shop, but…..
Check out my money flowchart to see my budget. It’s pretty high level and it’s more of a road map rather than a detail budget.
http://retireby40.org/2010/11/retirebyfortys-money-flowchart/
I like that flowchart! Every budget is different. I don’t think there’s one particular method that is best for everyone.
Life (or LIFE if you will) certainly does have a way of screwing up budgets. My wife and I have learned this first hand since we have tried to live by our for the year. I think we are finally figuring it out!
We have accounted for LIFE so that if anything happens, we have already prepared for it and have the finances in place to take care of it. It’s really a great feeling!
It does feel good when you discover that you are living within your budget.
As for me, it is the emergencies that has been screwing up the budget. Although from time to time, impulse buying can creep in.
When it rains it pours, doesn’t it? Sometimes it feels like there’s alwasy something unexpected that comes up to wreck the budget.
Impulse byuing and eating out more than we budgeted for. That’s what kills our budget. Holiday season is not helping either (impulse buying again…) I need to be stronger and resist more when it come to shopping. LOL
The holidays are always tough. There’s always another person who you need to get a gift for. And then there’s the feeling that if you don’t take advantage of a great sale, you miss out.
So glad you put it out there like it actually is. Its hard to always stay on budget because unexpected things tend to happen. Thank You so much for this great post.
Forgotten bills and sometimes car expenses mess up my budget. Thankfully, that doesn’t happen all that often and I have a little slush fund I can pull from when my budget for the month goes haywire!
Good to hear you have some $ stashed away for when you go over-budget!
A good budget should account for the variables! Things that can change and impact your life! When you prepare a budget you should ask a lot of “what if” questions. Plan for the unexpected, that is what savings or a contingency is for.
True. Yet sometimes even planning can be off. We have to try to get all the variables but the fact is, a budget is flexible and can change.
You are right, there are some things in life that even if you have a budget, life happens so it might not help. For example a few weeks ago I took my car in for an oil change and almost $800 later I realized that I need to budget for the unexpected.
Ouch! Sorry to hear about that. We once brought our car in for inspection and found out we needed new tires.
LOL! What a great piece! 🙂
The LIFE experience that invariably bollixes up my budget is when I take it upon my idiot self to make a large purchase early in a budget cycle. If I buy, say, a nice pair of shoes or (infinitely worse!) a piece of furniture in the first few days of the month, this will GUARANTEE that by mid-month the car will break, the dog will eat an open safety pin, the plumbing will overflow, and at least one hard drive will fail. Every time.
Emergencies screw up my budget … I feel like I’m still paying for a big car repair bill, even though the repair was done months ago. So much for buying an extended warranty. It did come in handy once, but for what I paid for the policy, who cares?
How’s this for a surprise? Last week I had a flat tired which led me to replace all 4 tires since that had to be done last year. One week later, my other car which is brand new had a flat as well and the older one also had another flat. I had to change 6 tires in all because apparently someone had SLASHED my tires so they can steal other things from me. The tires cost over $1200 in all.
Life’s full of unexpected surprises. Keep our eyes on the blessings or these events will drive us nuts!