Finance, Personal

Finance Friday: My Struggles with Budgeting

Budgeting is what everyone says is the key to being financially successful. And while I’ve enjoyed creating various hypothetical budgets in the past, I’ve never been able to stick to any budget I’ve made. While some worked better than others, the lack of success is I believe due to poor expense tracking.

The first step in budget creation is to track your expenses over a period of time (typically 3 months is the suggested length). Then taking the averages, use those values to create a budget, then review it each month. As I mentioned in the previous Finance Friday post, I would keep a close track record at the start but would fall apart halfway through the month. I’ve never created a budget with hard numbers of my spending, which might be why I’ve never stuck to any.

Some financial realizations

I’ve come to the realization, that when it comes to money, I like to deal with absolutes. A budget works around your projected income, and I’ve found I’d rather know exactly what I’ll be able to work with instead. As my income varies paycheck to paycheck, my total monthly income is never the same. A bi-weekly budget would work better for me in the long run, as I can make changes or adjustments as needed from paycheck to paycheck.

Another thing that makes it difficult to create a budget, is that I have very few fixed expenses. I am very fortunate to have the advantage of my parents letting me live rent-free in their home. I do have fixed expenses (car insurance, phone, food), but that’s nothing compared to what rent and utilities would total up to. For a couple a years after I moved back in, most of my paycheck went to paying down over 10K in consumer debt, on top of school loans and a car loan.

I’m debt free now, so I have a lot more income to work with. However, having so few fixed expenses also makes me feel obligated to save as much as I possibly can. I’ve made savings my largest fixed expense, but I worry that I’m never saving enough. Now, you can’t just save and do nothing because then your not really living. But I know once I’m able to afford my own place, I will likely never be able to set aside as much money as I’m able to do now. It’s a reality that I need to come to terms with sooner rather than later.

Can I stick to a budget?

For now, I’m doing pretty well financially, so not following a traditional budget is fine in my opinion. I have finally found a way to successfully keep track my spending, by breaking it down by paycheck. I’ll be looking over the past few weeks to figure out some averages, plus categorize my spending. I also plan on creating a savings/budgeting challenge. Haven’t hammered out the specifics, but it’s mostly to get used what I could realistically save in the future.

I’m not sure if either of these actions will make a difference, but it’s worth a shot! I do think I do better with knowing my exact overall limit than trying to set a perceived limit. It’ll be an interesting experiment to say the least.

How good are you at sticking to a budget? Share tips or tricks you have down in the comments!