Why Your Budget Doesn’t Work?

There are several tiny points, but the ones that affect the result of your budget considerably are:

1. They aren’t real
2. Budget for one month doesn’t connect with the other
3. They don’t tell you what to do with the surplus money, once all the categories are filled

Let’s have a look at each of them one by one:

They Aren’t Real

There are several reasons why most of us plan to start our budget. Some are motivated by their financial consultants, some really want to save money for repaying debt or to invest. The enthusiasm is, however, only temporary, and hence, we set budgeting figures that are unreal. We know we would exceed the amount we have set for each category, yet we think we would succeed. Unfortunately, the result is not as expected, and we end up overspending on each category.

Not reaching the goal, even by a small amount, is very discouraging.

So, what’s the solution? Even if you try to set realistic goals, you would over spend the amount almost every month. However, the key is not to get discouraged. Measure your result in how much did you save more, over last month.

Budgets For One Month Doesn’t Connect With The Other

Each month, either you will underspend or over spend. And that would be the only tool to measure your success. However, most budgeting methods don’t tell you how to deal with the difference. You simply start with the next month’s budget and strategies.

What about the money that you saved? What about the extra money that you put in?

If the budget of previous month doesn’t connect effectively with the budget of next month, it’s simply a piece of dead document. It’s lively only if it’s in continuous series, like reality. You shouldn’t forget about your previous month’s result, simply because you are starting with the new month. Look at the big picture. You are not trying to tackle your months, you are handling your finance.

Try to link budgets of all the month. Better, don’t have a monthly budget. Have a long series of budgets.

They Don’t Tell You What TO Do With The Surplus Money

Most budgeting method asks you to allocate funds to various categories. And nothing’s really wrong with the approach. However, they don’t tell you want to do if money allocated to a category is not completely utilized. Okay, may be that’s common sense. You would either invest it, use to repay the debt, or simply add on the surplus to next budget. This common sense, however, is different for every person. And that’s exactly where they mess it all up.

Besides, a general tendency is to use up all the money assigned to each category. When we are on a budget, most of us feel miserable, and feel we are depriving ourselves. Hence, we use all the funds allocated to each category.

You can plan to save money from each category, and before you start working on your budget, decide where the money would go.

Here are few additional tips to make your budget a practical one:

• Don’t try to rush things. If you are starting today, there’s lots you have to learn. It’s okay. Go slow.
• Set realistic figures. Identify the enthusiasm in you, and keep it alive. Only don’t let it control the budget you set for the month.
• Know that you wouldn’t spend exactly what you have budgeted for. You may or may not overspend. But that shouldn’t make a difference to your budget or motivation.
• Know what you will do about the difference between ‘actual spending’ and ‘budgeting’.

Instead of deepening into the significance of personal finance budgeting, let’s get started with how to go about with it. Here is a 5 step crash course in budgeting.

1.    Analyze your Expenses and Income

First step includes jotting down your expenses and income. Period. You don’t have to break it up into any categories. Do not, however, forget to mention every source of income, every penny that comes to you whether it’s birthday check, inheritance, salary, and so on. Same applies to expenses as well. Do not miss out on anything to have a proper, accurate budgeting tool.

2.    Break Your Expenses into Categories

Once you know how much you earn and how much you spend, it’s time to know where your money goes. Since you have just started, I know you wouldn’t have an accurate amount for each category, but try to get an approximate figure. Categorize your expenditures into food, utility, grocery, shopping, investments, savings, and so on. Have a ‘miscellaneous’ or ‘sundry’ category to add all uncategorized expenses.

3.    Set Your Goals

I ask all my clients to maintain a personal finance budgeting journal, and I ask them to write their goals on the first page of the journal. Writing does make a difference. The more you see it, the more you think about it, and the more you remember it.

That was about the ultimate goal you want to achieve. You would also have to set a goal, or rather a limit, for each expense category. Set a goal on how much you want to save every month, but cutting down on expenses.

4.    Set a Path

If setting a goal was an easier task, here is a difficult one for you: deriving a way to achieve your goals. Some prefer to cut down on expenses radically, and some develop additional sources of revenue. I would suggest cutting down expenses from each category would be a better way to get started.

If you find it difficult to save some amount every month, here is a quick way to do it. Ask you bank or your employer to deduct some amount from your paycheck and deposit into your savings account directly.

5.    Execution and Consistency

Most difficult step of personal finance budgeting is executing your plan and being consistent. Remember, only getting started is difficult. Once you do if for few months, it would be very easy to go on. Execute the plan for sometime, consistency would follow automatically.

According to Labor Department statistics there are about 678,000 professionals from different industries who are putting a scanner on extra expenditure of money and are trying their best to cut costs on wastage. Kevin Molls, CEO National Restaurant Consultants, is a foodie who believes in budgeting out on excess expenditures in his restaurants. For example, he wont’ serve you ranch dressing daily. You’ll get to eat it only once in three days. This will save up the preparation time by 15 to 18 minutes. Ingredients are also substituted to cut down on dish costs. Did you know marinara sauce sans olive oil was cheaper by $17,000 annually for a restaurant group? Iced tea is fast replacing soda.

The $566 billion restaurant industry is one of the worst affected in the present times. According to Dean Small, Synergy Restaurant Consultants, Laguna Niguel, Calif, “A lot of restaurants are bleeding. In some cases, they’re hemorrhaging.” In past recessions the restaurant sales might have dropped by only 20 percent but in the present massive one, the sales have dropped by 50 percent. Restaurants are trying their best to make their cost cutting measures opaque to their customers so that people enjoy the food and ambience as before. These changes will really not make a difference to you as a customer. You might have to use recyclable napkins, bamboo furniture and disposable straw cutlery . They are a plus for the environment too.

A lot of wastage takes place in the restaurant kitchens. There may be instances of waiters mouthing food here and there apart from, their scheduled quota and cooks wasting substances with wrong estimations. If you cook more than the ordered amount or arrange more than the standard quantity for a particular plate you are wasting money. Also the work efficiency of the chefs is matter of concern. If they take a longer time for preparing; they are wasting fuel or not cooking to the right extent. All this is strictly supervised.  All this cuts down from 25-34 percent of the costs. Well, you might not like the idea of getting lesser to eat for a given price. But since the difference is very small, you’ll not mind it. Think from the point of view of the restaurateur. Even he’s got a business to run, hasn’t he?

Let us take a look at the expenditures that you’ll have to put up with when you own a vehicle

• Garage costs- If you are staying in a rented apartment, you’ll have to pay the garage rental charges.
• Fuel charges are very high these days. Besides you really can’t avoid maintenance charges.
• Parts replacements also cost you a fortune at times.
• Vehicle insurance is another thing that eats up a large chunk of your earnings.
• Accidents thefts and other damages might cost you a fortune.

So these are the charges that you’ve got to pay apart from the big investment that you might have already made for purchasing the car. If you’ve made a down payment, thank your stars! But if you are on monthly EMI then all these costs add up to make a consolidated amount that’ll be too heavy for you to bear.

Instead think of some ways in which you can save up on this car costs. Just consider these ways.

Take To Bicycling

Nothing can be as pleasurable as bicycling. It’s not only environment friendly, but also very cheap. Buy your own bike or hire one. Nowadays the League of American Bicyclists has come with a list of cities that are compatible to bike riding, if you’re thinking that you’re living in an area of high traffic congestion. You can avail the bike sharing facility if you stay in the District of Columbia. The Bike Project repairs and sells old bicycles and you can buy these for really cheap prices. Not only are bikes cheap and environment friendly, they are exercising equipment for you so that you slim down and keep fit. With a bicycle, you’re saving up on your fuel and maintenance costs, which you’d have to bear for a car.

Walk or Go By Bus

I love to walk whenever I get the opportunity to. It’s good for my health and a free mode of transportation. Bus rides are so enjoyable. Take them whenever you can. Of course they should be regular, less crowded and convenient to travel. As you travel in groups you are safer too!

Go For Car Sharing

There are times when you cannot do without a car, for example, when you have an important meeting to attend in office. Under such conditions, book a sharing car beforehand. These are cheaper than owning individual cars.

When it comes to a cost-cutting lifestyle, a private car is non-essential but there are some exclusive conditions where a private car is the best. For example, traveling on an emergency in the shortest period of time is best achieved with a private car.

Clothing

New York, San Francisco, San Jose, Brooklyn and Dallas are the cities that spent the least on this category. The average New Yorker spent $ 250 on clothing in the last one year, followed by San Francisco ( $ 220), Dallas( $ 200),  and Brooklyn ( $ 175 approximately ) which is closely followed  by San Jose ($ 173 approximately).

Books

Books have become quite an expensive expenditure and college textbooks have been very costly. Here are the 5 cities that have spent the least on books in the last one year. If you’re from Chicago you might have most probably spent about $ 68 on books, followed  by your friends in Austin( approx. $28), San Francisco( $ 27 approx. ), Dallas( $ 26 approx. ) and San Jose ( $ 25 approx. ).

Electronics and Software

In the Electronics and Software area the cities that spent the least were Philadelphia, Houston, Miami, Dallas and San Francisco. Philadelphia was the highest spender amongst them, the average monthly expenditure going up to $ 180, followed by Houston and Miami ( $ 132 approx), Dallas ( $ 120 approx), and San Francisco( $115 approx).

Hobbies

The 5 cities that spent the least on hobbies are Houston, Austin, Dallas, San Jose and Seattle. You might have been bored to death if you’re a resident of any of these cities. If you’re from Houston or Austin, you might have spent approximately $ 15 only on a monthly basis followed by those in Dallas and San Jose (approximately $ 12), Seattle ($11 approx. ).

Sporting Goods

Sporting goods were the last category on which five cities were spending the least. Portland, Denver, Seattle, San Francisco and Minneapolis are the ones which had people spending the least on the sporting goods category. Portlanders spent about $52 approximately on sporting goods, followed by those in Denver who spent $ 38, and those in Seattle who spent $ 32. The least spenders were San Francisco and Minneapolis where people spent about $ 28 on an average in a month on sporting goods.

On the whole the cities that have spent the least in the last couple of years are Brooklyn ( -28 %) followed by San Diego(-23 %) , Portland, (-21 %), Miami ( -16 %),  and  Indianapolis (-14 %).

I’ve heard financial experts suggesting that you should postpone your summer wedding to winter just to save up on costs. Because winter happens to be an off season, they say that you’re going to get rental venues, wedding services etc. for lower rates. Banquet halls, flowers, photography and transportation are going to cost you much less because winter’s not particularly a season for weddings and past records have shown January to be the month when least number of weddings have taken place. But I ask why should you postpone your pleasures till winter, when by practicing some simple money saving ways you can cut down on the costs? Why compromise with the hardships of winter for your celebrations?

You don’t have to wait for a particular season to get married. Get married whenever you want to regardless of the both the environmental and fiscal seasons. Here are simple ways you can have an enjoyable fare at the minimum cost:

• Throw the party on a weekday rather than a weekend. Many banquet facilities and caterers offer discounts for weekday celebrations in comparison to weekends and holidays.
• Forget dinners, throw a lunch instead. Personally I’m more interested in the menu than the time of day. I’m fine with a good party lunch. Many hotels have lower banquet hall rates for lunch because after your event they hire it out to other people. Also be very specific about the number of hours you’d be hiring a wedding venue for. Don’t hire for the entire day if you have plans for spending only a part of the day.
• Do you think you’ll need an entire bar for your wedding? Instead have only a few drinks. You can keep only some beers and wines that people love the most.
• How much are you spending on decoration? Is it necessary for you to go for ice sculpted furniture that is the present craze? You can go without that expensive ice sculpted stuff right?

A little bit of adjustment here and there is what is required for you to have a grand wedding. After all more than the party, a host people and extravaganza, happy companionship is important. With a little budgeting every season is the best suited for a wedding.