Tried your hand at budgeting but can’t seem to make it work? Or maybe you are new and would like to learn about common budgeting challenges and how to overcome them. Either way, you’re here because you have made the decision to prepare better for your budget challenges and ace your financial journey!
Budgeting can sound like a difficult beast to master but it really doesn’t have to be. All it needs is a little bit of discipline and self control to stay on track and that’s it!
The results of budgeting are worth all your hard work and more. It will help you break the paycheck to paycheck cycle, payoff debts, improve your savings rate, plan for your future and help you achieve meaningful milestones in your life!
I’m sharing the top 8 budgeting challenges that people struggle with on their financial journey and I’ll talk about how you can easily conquer each one! 🏆
Top 8 budgeting challenges & how to overcome them
1. Complex, time-consuming budgets
Complex budgets are the quickest path to failure. You don’t need fancy apps or the latest tools to follow a budget. They tend to be complex and time-consuming and that just adds to the challenges of budgeting. Nobody has 2 hours to enter numbers into apps and excel sheets!
Which budgeting method should I use?
When I did my research, I was so overwhelmed and confused by the various budgeting methods. Mainly, I found that none of them can fit every person’s needs.
The cash envelope method is quite impractical and rigid for most people. The 50-30-20 budgeting rule (50% for needs, 30% for wants and 20% for savings) may work for some but it’s tough when you’re living in a city with crazy high rents and you feel disheartened when your expenses don’t fit the quota.
After trying and failing multiple times, I created a simple and sustainable budgeting method that can work for anyone. In just 4 easy steps and 15 minutes, you can create your own Progressive Budget. Budgeting is not a quick sprint, it’s a marathon that gives you steady and impressive results! I saved $25,000 in just 7 short months! So, keep your eyes on the prize.
I’ve also shared the free Progressive Budgeting bundle which has printable worksheets to help you get started! 😁
2. Complete denial of entertainment
Set aside some money in your budget for entertainment, hobbies or activities that bring you joy! This is essential because if you deny yourself completely, you’ll quickly resent your decision to budget and go back to your old lifestyle. Instead, focus on making small meaningful changes that you can sustain.
That means, instead of making spontaneous travel plans multiple time a month, plan a memorable trip and save up for your vacation in advance. Everybody has their own vice when it comes to spending! It could be spa days, sneaker collections, bar crawls, golfing or any of the million other hobbies. So, think about which ones are meaningful to you and try to progressively scale back on the rest.
There are plenty of amazing free or low-cost activities that you could enjoy with your family and friends. Think patio brunches, dinner parties, game nights, wine and paint, hiking, campfires by the beach or in your backyard or movie nights!
3. Over ambitious budgeting goals
While setting your budget, take small and steady steps to trim it. By targeting over-ambitious cuts to your expenses, you would be setting yourself up for disappointment when you can’t achieve them. Budgeting has enough challenges without the added pressure!
Remember, we’re in this for the long run! If you spend $400 on shopping every month, start by cutting 15-20% and set that as your target. These bite-sized goals are super achievable and the small wins will motivate you to keep aiming higher! 🤩
4. Irregular expenses
Don’t you just hate it when you’re having an amazing month and following your budget but then an irregular expense comes your way?! 😓
Occasional expenses are not exactly emergencies because you expect them but they don’t fit into any of the regular budgeting categories. This could be expenses like gifts for birthdays, weddings, Christmas, outfits for an event, school/college supplies or travel. You can’t dip into your emergency savings for these!
Note: If you’re confused about what emergency savings are for, let me clarify. True emergencies are those that hit you out of the blue, there is no way in hell you could have planned for it and you wouldn’t know how much it would set you back. Example: your car breaking down – you couldn’t have known that it would happen and you have no idea how much it will cost to fix it!
Irregular expenses are super annoying but there is an easy fix to this mundane problem – sinking funds! Contribute a fixed amount, let’s say $200, to your sinking fund every month. Use this account to pay for any irregular expenses you may have throughout the year. And keep it separate from your checking account so that you don’t accidentally dip into it.
Some people like to maintain multiple sinking funds for each purpose, like a vacation fund, home repairs fund, gifts and parties fund, vacation fund, tax fund etc. Choose a path that is manageable for YOU!
5. Fluctuating income
Whether you are a part-time employee, entrepreneur, side-gig hustler or self-employed, you know the unique frustrations of earning an irregular income. The unpredictability just adds to the challenges of budgeting and you might be tempted to scrap the whole idea. But this is where budgets really shine!
Budgeting will help you take back control of your finances so that your fluctuating income doesn’t control your life. It will help you plan a stable, predictable path to your financial goals. Whether it’s paying off debt, saving up for a house, retirement or whatever else your goal may be.
Create a budget for the lower range of your income. Make sure to budget for all your essential categories (food, utilities, housing and transportation) and set a lean budget for your entertainment categories.
Set up a sinking fund to help you out during the slower/leaner months. And during higher income months, make it a point to contribute your savings to this sinking fund. This will spare you from dipping into your emergency savings and the extra funds will give you immense peace of mind!
6. Impulsive shopping
Setting a budget may make you feel like rebelling during the month and spend impulsively. It’s only natural to feel like doing something when you know you aren’t supposed to! My best tip to curb impulsive purchases is the “out of sight, out of mind” rule.
- Empty your wallet of your rewards cards and extra credit cards. Just keep the bare essential items in your wallet.
- Unsubscribe from promotional emails from clothing, accessories, makeup brands or anywhere else you window shop. It’s hard to resist shopping when you see cute shoes on sale!
- Avoid hanging out at malls. Seeing a big sale and not being able to buy something will sting you with FOMO (Fear Of Missing Out)! It’s best not to know.
- Avoid window shopping online. Idly browsing the hot deals on Amazon is a surefire way to buy something that you don’t need!
Before purchasing an expensive item, wait 30 days and re-evaluate your need. Most probably you’ll forget about the item or learn to live without it. For smaller purchases, wait at least 5 days.
7. Dining out
An average family spends 50% of their food budget on dining out! Dining at restaurants or getting takeout is the top favorite indulgence for most people. And that’s what drains your income the quickest.
The easiest way to cut back on this expense is to meal plan and learn some quick and easy recipes. And I know, cooking a meal everyday sounds like a dreary, time-consuming task. But it really doesn’t have to be!
Dhruv has created a free recipe book that has 60+ quick & easy recipes from cuisines around the world. So you’ll never need to worry about having a boring meal! He also shares super simple recipes that taste better than takeout and are ready in less time than it takes to get takeout!
Cooking at home instead of ordering out is a habit that takes times to build. After a long day at work, Dhruv and I used to reflexively open the delivery apps to order dinner. But once we made the decision to cut back, we set a goal to eat out only 3 times a week and spend 20-30 minutes on the other nights to quickly prepare dinner. It’s easily one of the healthiest and smartest decisions we’ve made! 😊
8. Open up to your family & friends
For budgeting goals to succeed, your partner and kids need to be on the same page as you. Financial goals are a shared mission. Trying to do it solo leads to budgeting challenges. Imagine trying to save $40 a month on groceries while your partner wants to upgrade to that $2000 sound system!
Involve your partner in all exercises like creating a budget and reviewing your monthly expenses.
On that note, don’t think twice about letting your family and friends know when you can’t participate in something. It’s okay to say no! In fact, practice it! Nobody wants you to be in a financial distress, they’ll understand if you can’t join them on their expensive vacation.
If your friends suggest a pricey restaurant, just say that it might be too expensive and suggest an alternative location or a plan a dinner party! That way you can spend more time together in a relaxed environment and most probably, they’d be happy about saving the money too.
Having financial goals is nothing to be embarrassed about, you’re empowering yourself and safeguarding your future. If you have to say to NO to things once in a while because it’s out of budget, that’s a small price to pay!
Parting thoughts
Everybody’s life is different and budgeting can be a unique experience for each person. It takes times to find your rhythm. Remember that it can take at least 3-4 months to see good results. So be patient and know that you can tackle any hiccups that may come your way!
Share your progress in your budgeting journey with us! What are your biggest challenges with budgeting?