Here are some of the reasons why they are unable to maintain discipline and what they can do to ensure compliance.
Don’t think of a budget as the magic wand that will instantly take away your money woes. For instance, if you think you can suddenly start saving large amounts by curbing your lavish spending when you have been an impulsive buyer all your life, you will be disappointed. Similarly, don’t expect to save large amounts if you have a low income and all your spends are on needs, not wants.
What you should do
Set realistic targets. If you intend to save, you will need to track your expenses for a few months before deciding which ones you can cut. You will also have to discipline yourself about your spends consistently before you can increase your savings. Also be realistic about your financial situation, habits and attitudes.
- Inaccuracies in tracking and record-keeping
You may have created a budget enthusiastically, but are you putting in the work to maintain it accurately? If you are not tracking every spend or forget to record it rigorously, you will not get a correct picture of your outgo and take wrong decisions or set unachievable goals.
What you should do
Use a tracking and spending app or automated software, or maintain a spreadsheet, or simply keep a notebook to record your spending, and do it regularly. Fix a specified time each day or in a week to do so.
Big spenders find it especially hard to stick to a budget because they are unable to control the outgo, leaving them either with no money at the end of the month or unable to achieve their financial goals.
What you should do
A good way to inculcate discipline is to fix your goals and automate savings. Once you know how much you need to save to reach your goals and the money goes out of your bank account as soon as your income arrives, it will be difficult to access money to spend. Importantly, get rid of your credit cards to curb the urge to spend.
An easy way to justify your spending is that you have a lot of money lying in your account and you don’t need it immediately. Spending this money is the simplest way to lose track of your budget. If you identify your goals and calculate how much you will need to save every month to reach these, be it for your children or your own retirement, it will be hard to use that money on dispensable stuff.
What you should do
Identify all your goals, big and small, and fix the goal values by taking into account inflation. Calculate the exact amount you will need after a specified time so that you know how much you need to save each month for every goal. It will be easy to resist the temptation if you know you are jeopardising your children’s or your own future.
Your budget is unlikely to sustain if you are being too hard on yourself. If you cut out all of your and your family’s dispensable, fun spending like eating out or entertainment, you or your family will rebel sooner than later and kick out the budget. Just like a very tight diet that does not allow for cheat days or occasional bingeing is headed for failure, so is the budget that does not reward you for your efforts.
What you should do
Make a provision in the budget itself for light spends or occasional discretionary purchases like eating out to let off the steam of following a tight budget. It will keep you and your family motivated enough to stick to the budget.
If your spouse and children are either not kept in the loop and are unaware of your plans or refuse to go along and heed to the demands of the budget, it will be impossible to make it work. If you are saving, but your spouse cannot resist the urge to buy big-ticket gadgets, or the children insist on keeping up with their peers’ spending styles, you alone will not be able to sustain it. It will, therefore, be key to the success of the budget that every family member cooperate and stick to it.
What you should do
Sit down and talk to them about what you are planning and how you intend to achieve it. The best way to keep every member motivated is to show them what saving can achieve: bigger house, vacation abroad, foreign education, etc.
A budget is not a static thing and will need to be changed with altered circumstances and life stages. A higher-income could mean you can now save for an additional goal that was earlier beyond your reach. When you get transferred to a new city, or get married and have a child, or develop a medical condition, your expenses will rise. Your budget will have to keep pace with these changes if you want it to work.
What you should do
When the income rises, make fresh investments. If you face a salary cut, remove discretionary expenses. When you have a child, include new goals and increase your savings. Make your budget evolve with every financial development.
- You forget big annual expenses
If you don’t take into account the bigger expenses you are planning in the year, say, house painting and renovation or a longer holiday or buying a bigger home appliance or furniture, your budget will go haywire when you have to pay a large amount all at once.
What you should do
When you review your budget at the start of the year, make sure to include the bigger financial expenses you are planning through the year. This will help you calculate the extent of slashing your expenses require on a monthly basis so that you can save for the bigger expense.
- You don’t have an emergency fund
One of the biggest stumbling blocks while trying to stick to a budget is dealing with eventualities for which you have made no monetary provision. So if your house requires urgent repairs, or you face a sudden salary cut, or you fall ill and don’t have sufficient insurance, your budget will go for a toss due to the big expenses.
What you should do
Before you start work on your budget, build an emergency fund that is equal to 3-6 months’ household expenses. In addition to this, either buy health insurance or keep a substantial buffer to take care of your medical expenses.
