Budgets don’t always go as planned. These four simple steps will help you overcome and fix a budget fail.
You probably have budget. (Guurrrllll, you better have a budget if you’ve been reading this blog longer than a week.)
Budgets are supposed to solve your money problems, right? At the very least, they are supposed to put you on the right path towards money happiness. You know, that glorious destination of debt-freedom, plentiful retirement savings, home ownership, and copious amounts of fun money. Budgets are supposed to do that.
But sometimes, budgets fail. Maybe it’s because you had a weak moment and bought that new dress. Maybe you felt peer pressured to go to that bachelorette party in Cancun. Or maybe you were just over-ambitious with your budget goals. Whatever the reason, busted budgets happen.
A failed budget can be demoralizing. It can make you feel like giving up, especially if it happens several months in a row. It can feel like making a budget is pointless. Let me raise my hand right here and tell you that this happened to me, like lots of times. And honestly, it sometimes still happens.
When I started my first job and started to make payments on my debt, I knew creating a budget was key. So I put all my brain power into making the perfect budget. But then, the first month of my budget my car was due for a check-up (see ya later $500). Second month – I got a speeding ticket. Third month – rent increased by 20% (thanks city living). You get the picture. I felt like I put all of my eggs in the budget basket, and the basket broke. I’d give up on my budget and then pick it up again a few months later. It was a cycle. The promise of a budget was so appealing. The reality of a budget was just demoralizing.
After a few years of this unsuccessful budget cycle, I decided that I couldn’t keep giving up. I needed my budget work to finally pay off my student loans. I created a four step plan to help when I experienced the inevitable busted budget. I’m sharing it with you so that you don’t give up on your budget.
1. Relax. It happens to everyone.
A busted budget resulted in panic for me. It would start small like ‘arg! I won’t be able to pay extra on my debt this month’ and balloon into ‘omg, I’m going to be in debt forever and I’ll have to move back in with my parents’. Can you tell I was a little dramatic?
I didn’t realize that budgets aren’t perfect and they never will be. Budgets don’t always work, but they can always be re-worked.
The important thing to remember is to just relax. This isn’t a time to throw in the towel. You can fix this. Your budget will recover.
2. Ask yourself if there is an easy fix to the busted budget (i.e. can you return the item?)
Sometimes in the heat of the moment, we buy something we don’t really need (… or want). Can you return the item that ruined your budget? If you can’t return it, can you sell it? You may not make all your money back by selling the item, but you may reduce the impact to your budget.
Ask yourself if you can somehow undo whatever your caused your budget to break.
3. Figure out how to pay for the unexpected expense
Determine if you can redistribute your budget categories
One of your budget categories may have gotten a little out of control, but that doesn’t mean you entire monthly budget failed. Can you ‘steal’ money from some of the other budget categories and put it in the troubled budget category?
For example, if you lost your glasses and had to spend an unbudgeted $200 on new ones, can you find an extra $200 in your monthly budget? If you save $50 on your grocery bill, eliminate all restaurant spending to save another $50, zero out your clothing budget to save $25, and choose to not contributed $75 to your vacation savings fund, then you will have made up the $200 in your budget for new glasses and your overall monthly budget will be minimally affected.
If your budget busts and you can’t fix it by returning or selling the item, try to redistribute your budget categories so that it does not affect your total monthly expenses.
Reduce your extra debt payments
For those making extra payments towards debt, if you can’t redistribute the entire amount of the unexpected expense, you can reduce the amount of extra debt payments you make. You should always be paying the minimum payments, at the very least.
This way of fixing a busted budget is a very slippery slope. If you get into the habit of doing this, your debt payoff progress will stall. This should be avoided as much as possible.
Dig into your savings
If you can’t redistribute the funds, can’t reduce your debt payments (or don’t have debt payments), then you may have to dig into your savings. It sucks, but it’s better than going into debt and letting the budget fail linger for months on your credit card statement.
Use your emergency fund
Was the reason for your busted budget an emergency? Like a true emergency? If so, use your emergency fund. That’s what it is there for.
4. Determine how to avoid another similar budget fail
What was the cause of your budget bust? Did you buy something because you were stressed or bored? If so, put a plan in place so that doesn’t happen again. For example, you can make a rule that if you are feeling stressed/bored, then you will call a friend, go for a walk, do an arts and crafts project, or something else that doesn’t involve spending money.
If your budget bust was something that should have been planned for, start incorporating sinking funds into your budget. Saving a little bit of money each month with sinking funds will ensure you are ready for the next budget buster.
If your budget bust was because you just underestimated how much you spend in that budget category, redo your budget. Your budget has to match reality. It’s just not possible to spend $20/week on groceries for a family of four. If you are trying to save money, I recommend lowering the category by 5% or 10% each month until you hit a realistic and feasible budget.
After each budget fail you need to reassess your habits and reevaluate your budget to prevent it from happening again.
Overcoming a budget fail
Going over budget does not mean a death sentence for your finances. It happens to everyone and shouldn’t mean that you give up on budgeting, paying off debt, saving, or any of the other good money habits.
To recover from a budget bust, avoid panicking (and crying and getting anxious). Quickly see if there is an undo button – can you return or sell the item? If this isn’t possible, figure out how you can pay for the budget buster – can you redistribute budget categories, reduce extra debt payments, use savings money, or use an emergency fund? Then, try to prevent this from happening again by fixing your bad habits and redoing your budget if necessary.
What has caused your budget to fail?