Narrator: If you've ever tried sticking to a budget and failed, you're not alone.
Some of the biggest budgeting pitfalls include getting overwhelmed, having unrealistic expectations, and being too strict.
Knowing ways to avoid each pitfall can help you stick to a budget.
One main reason people abandon budgets is simply because it's difficult and can feel overwhelming. According to the Consumer Financial Protection Bureau, half of American consumers say they don't even like to think about money.
And it really can be difficult to pull all of your financial information together, make a budget, do paperwork, calculate the math, determine trade-offs, and deal with constraints.
But technology can make this work a lot easier. There are numerous budgeting apps out there to help you keep track of your inflows and outflows. These tools often allow you to link your bank accounts and credit cards to automatically track transactions and account balances. Some apps even break down your spending into different categories so you can track how much you're spending on food, transportation, entertainment, and so on.
These tools can help clean up the messiness of managing your finances and sticking to a budget.
Another common budgeting pitfall is having unrealistic expectations. Deciding to take control of your money can be exciting, but that early dose of motivation can lead to an overly optimistic outlook. In reality, you probably won't be able to cut your spending in half overnight or become immune to all impulse purchases forever.
A successful budget is a sustainable budget, which means looking at your current spending and finding ways to gradually reduce expenses over time. It also means leaving room to splurge every now and then. You'll never stick to a budget that removes pleasure from your life.
Studies suggest that people tend to overestimate their willpower, and that willpower is depletable. So, create an environment that will help you be successful. It's easier to make a good choice when "past" you has already made the decision for "future" you. This may mean using the "out-of-sight, out-of-mind" approach. If you have a history of running up credit card debt, consider cutting the cards up.
Instead of relying on willpower, automate your finances to pay yourself first for things like retirement. For example, you may directly deposit money into a 401(k) with each paycheck, or you might set up automatic payments to ensure your bills are paid before the fun begins. Automation may offer you more flexibility to spend without tracking every penny.
However, there's only so much you can predict about your future spending, which is why the last pitfall is being too strict.
Some budgeters tend to plan to the penny and get frustrated when bills come in higher than expected or unplanned expenses arise.
It can help to put a little padding in the budget by rounding up your expense projections or budgeting for seasonal highs on things like utility bills or unexpected expenses. It's easier to transfer unused funds at the end of the month than try to search for money midmonth.
Most importantly, if you fall short of your goals, re-adjust and keep moving forward. As your life changes, your budget should change with it. Remember, you don't have to be perfect—strive for progress, not perfection.
So, while budgeting isn't always easy, avoiding the pitfalls can help you succeed. Taking advantage of technology, having realistic expectations, and being flexible can help you make a budget you can actually live with.