There are definitely numerous challenges of budgeting. While sticking to a budget can help you keep monthly expenses under control, sometimes it can be challenging.
And it’s not just the urge to spend money (though that is part of it). If you plan to stick to a budget, you will probably run into some hurdles. As we all know, life can get messy sometimes. That probably means you will have challenges of budgeting.
But what are those challenges and what can we do about them? Let’s run through some of the challenges of budgeting and what you can do when they inevitably happen.
Challenges of Budgeting: Inconsistent Income
While many people have the same income every month, that’s not the case for everyone. And bloggers like myself are not the only ones who deal with such challenges.
Actually, there are many types of jobs that don’t always have the same income. The one that immediately comes to mind are waiters/servers. Because a large portion of their pay comes from tips here in the US, their income is bound to fluctuate.
Having an inconsistent income can be one of the biggest challenges of budgeting. However, you still have options if that’s the case. For example, one possibility is to used flexed budgeting.
Also known as flexible budgeting, this type of budgeting allows you to have some breathing room. Rather than a static budget, which means your expenses must always be the same, a flexible budget allows for some fluctuation.
If your income is inconsistent, this is likely the best approach. This approach allows you to spend less when you make less and spend more when you make more.
Gig Economy Work
As you may know, one of the best things about these jobs is you can set your own schedule. Thus, you have the ability to only pick up extra “shifts” when you income at your other job isn’t quite cutting it.
On the other hand, when your primary income is meeting or exceeding what your budget requires, you can opt not to pick up extra work.
We just talked about inconsistent income; on the other side of the spectrum are unexpected expenses. These expenses happen all the time, but they can be disastrous. And given that 78 percent of households live paycheck to paycheck, it shouldn’t be a surprise that so few of us are prepared for them.
Although so few of us are fully prepared for these expenses, that doesn’t make them uncommon. Think an expensive auto repair, medical bill, or a water heater that needs to be replaced. These things are part of every day life, and yet they can easily derail almost anyone’s budget.
So, what can you do when something inevitably breaks? Many people turn to costly loans or to borrowing money from a family member. One of these options might be your only choice initially, but there are better ways to be prepared.
I always recommend having an emergency fund. There are no exact rules for how much money you should have saved, but the typical recommendation is 6-8 months worth of living expenses. Having that amount set aside will cover you not only when you incur large expenses, but also with the loss of a job, for example.
Of course, most of us don’t have that much money right away. I recommend setting up a high-yield online savings account and setting aside as much money as you can every month. Even if that amount is only $50, if you are consistent, you will eventually have a healthy emergency fund.
And that means no more disasters when unexpected expenses inevitably strike.
The Scarcity Mindset
I have written about this challenge of budgeting before. But what is the scarcity mindset? This is the idea that you must stay within budget, regardless of how much of a difference it actually makes.
Lately in the financial independence world, there has been a lot of talk about whether you should “buy the latte.” With the scarcity mindset, you are probably less likely to buy it. After all, that $4 may make you less likely to stay within budget.
But here’s the thing: $4 isn’t going to move the needle much, especially if retirement is your goal.
What you should do about this really depends on your goals. If you have more short-term financial goals, you may need a strict budget. On the other hand, if you are focusing more on the long term, you can even have a flexible budget – or no budget at all.
There are a lot of factors at play here, but in general, I think you should buy the latte!
Challenges of Budgeting: The Urge to Spend
This is closely related to the previous section, so I won’t go extremely in depth here. The urge to spend is basically the opposite of the scarcity mindset.
Rather than feeling like you have to pinch pennies to the extreme, you want to spend money. No, you need to spend money. This is basically the budgeting equivalent of “don’t press the red button.”
While you know you shouldn’t do it, the fact that you aren’t “supposed” to do something makes you want to do it even more. This is very much a psychological thing; budgets will have different effects on different people.
So, what can you do about it? There are many different possible approaches. If you have credit cards, you might decide to get rid of them.
Another method that I talked about in another post is budget envelopes. With this strategy, you pay for everything from cash allotted to different budget categories (groceries, restaurants) each month. If you run out of cash in a budget category, you have to find a way to make do.
Whatever approach you take, the idea is to get your spending under control.
The Challenge of Saying No
Budgeting can be tough. Sometimes you will have to force yourself not to spend, and sometimes you will have to stop others from making you spend!
Whether it’s going to the movies, going on a trip, or going out for a fancy dinner, there will be times when someone invites you to something that is bound to be costly. While it’s easy to cave, the question is – should you?
That might seem like a straightforward question, but it’s not so simple. If this is going to be a one-time expense, it might not be so bad. However, it might be different if your best friend wants you to join a high-end gym or expensive club.
That could equate to a rather costly monthly expense – something you don’t want to do if your budget is tight. But even a one-time expense can be ill-advised if you budget is extremely tight.
At the end of the day, whether you should say no depends on two things – your goals and your budgeting style. For instance, if you use cash envelopes, it’s possible you quite literally don’t have the money for this expense.
Or, if you have a certain savings rate you are trying to hit for the month, you’ll have to ask yourself how important that is. If you aren’t willing to fall short of your savings goal, you will simply have to say no.
Fear of Missing Out
Fear of missing out (FOMO) is a psychological phenomenon often attributed to millennials. Usually, it refers to a smartphone addiction where people are afraid to be away from their phones too long because they’re afraid they’ll miss something important.
However, FOMO can also affect us when we’re trying to stick to a budget.
Imagine someone invites you to a local event in your community. The type of event isn’t important, but let’s say admission is $25. The event will be happening the last week of the current month.
Let’s also suppose you use budget envelopes. If you are already less than $25 away from your budgeting limit for the month, that means you can’t attend the event.
But what if the event is amazing and you miss out!? This is what FOMO looks like.
In general, I advocate for experiences over things when it comes to spending money, but you have to decide what’s important to you. If sticking to your budget is essential, then you need to stick to it.
Besides, there will always be another event. The likelihood that Beyoncé (or whoever your favorite celebrity is) will randomly show up at this one? Pretty unlikely.
Dealing With Boredom
Undoubtedly, one of the challenges of budgeting is dealing with boredom. When you can’t spend much (if any) money, you feel like you can’t do anything.
After all, you can only watch Netflix and look at your phone for so long, right? But let’s not forget that there are actually a huge number of things you can do for fun that are cheap or even free.
That might vary depending upon where you live – and certainly on the weather. But you can always have a barbecue, go camping/hiking, see a movie in the park, and so on.
The reality is that while there are many activities that are expensive, there are actually a ton that are quite cheap as well.
Breaking from Tradition
Let’s face it – we have a lot of traditions in this country that can quickly get very expensive. Holidays in particular have been monetized to such an extent that any budget can be derailed in a single day.
Think about how much people sometimes spend on Christmas presents or Fourth of July fireworks. Some people spend hundreds or even thousands of dollars on these single-day events. (Okay, so Christmas is arguably more than just one day, but still.)
But here’s the question: why is it so important to do spend so much on these things? At the end of the day, being with friends and family is what’s most important during Christmas. Once you realize that, you realize that maybe buying expensive gifts isn’t quite so important.
And for the Fourth of July, why not just see a free fireworks show put on by your city or town? Chances are the fireworks will be better anyway.
These are just two examples. Many more of them exist, but the point is that small shifts in mindset can help you fight the urge to spend thousands of dollars.
It all comes down to a simple question. What’s more important: your budget or some tradition you may not even understand? This seems like an easy enough question.
Not Knowing How Much to Spend
Another potential challenge of budgeting is knowing how much you can spend. You probably have a lot of different types of expenses, so how do you know how much you have left to spend?
Your first thought might be to track every expense and subtract them all for their budget. But that can take a lot of time and require you to manage complicated Excel spreadsheets. Who has time for all that? I know I don’t.
Luckily, there are some easy solutions that take very little time. One possible solution that we’ve already talked is budget envelopes. Because you have a set amount of cash every month, you don’t have to worry about going over. Once the cash is gone, you know you have nothing left to spend.
But what if you run out of cash in the middle of two paychecks? That could present some serious issues. Fortunately, we have another easy solution…
Weekly Budgeting. I reviewed this app and found it to be easy to use and incredibly useful. Just pop into the app and you’ll immediately see how much money you have left to spend this week. Yet again, no need to worry about figuring out how much money you’re able to spend.
What Are Your Challenges of Budgeting?
We’re all different, and that means we all have different problems. What specific challenges have you encountered when trying to set a budget? What did you do bout them?
I would love to hear your input on anything I might have missed.