3 Common Budgeting Challenges and How to Overcome Them

3 Common Budgeting Challenges and How To Overcome Them

So you created your budget, and you’ve never been so motivated! You see the light at the end of the tunnel. It’s been a few weeks, and, to your surprise, things have taken a turn. You notice a lack of motivation. You’re constantly tempted to buy things that would derail your budget. The pressing question you ask yourself is; what’s the point in doing this when it strips me of all fun in my life? Coming face-to-face with budgeting challenges is not uncommon and this is what you’re facing.

Don’t worry because many people face this problem, particularly when they’re new to budgeting and start without preparation. Even more, many people have grown accustomed to living a life driven by short-term gratification. But don’t be fooled; as difficult as it can be to succeed with budgeting, the value it holds should never be discounted. Canadian’s who budget are less likely to fall behind on their financial commitments when compared to Canadian’s who don’t have a budget.

Despite the difficulties, incorporating proper preparation coupled with a determined mindset can keep you on track. Continue reading for a comprehensive guide covering common challenges and practical ways to overcome them.

1: Not Setting Practical Goals

Setting goals designed to work with your budget is the key to success. Despite what goal you intend to achieve reach, if you’re not practical with the time frame, the probability of your budget failing is high.

So, how do you make your goals practical?

Creating SMART goals for your budget, particularly for long-term goals, is excellent for creating practical goals. It can help you break down goals and apply them to your budget with an achievable time frame. Moreover, it will help you break down your goals into achievable milestones.

Below is an example of incorporating a SMART goal into your budget.

Specific

Your goal should always be clear and concise. Suppose you want to pay off a $50,000 student loan debt. You can approach it whichever way you prefer. But like all things in life, the outcome is a result of the approach.

Below offers you two options to approach this goal. Note: this example does not include applicable interest. It is based on an interest-free loan. 

Scenario 1: I plan to pay off my $50,000 student loan in 5 years.

Step 1: Calculate how many months there are in 5 years.

5 (years) X 12 (months in every year) = 60 months

Step 2: Calculate your monthly payments, assuming you will be making equal monthly payments.

$50,000 (loan balance) /60 (total months) = $833.33 total monthly payment

 By budgeting an extra $833.33 each month for the next 60 months, you will successfully pay off your $50,000 student loan.

 Scenario 2: I plan to pay off my student loans by allocating my monthly savings to my balance.

Step 1: Calculate how much money you have saved at the end of every month and allocate it to your student loan.

So, after reviewing the above scenarios, which one will produce the best result?

If you guessed scenario 1, you guessed correctly. The budgeting plan is made with specific guidelines created with milestones and a particular end date. By creating specific guidelines, you will be on a linear path that will produce incremental progress, which is fundamentally necessary when paying off debt and creating a budgeting plan.

Scenario 2 is ambiguous and without direction. It does not have an anticipated end date, and the monthly payment amount is not specified. In this case, it can take you many years to tackle the debt. It is far too ambiguous, and over time you will become overwhelmed and lose motivation to continue.

Measurable

Ensure you include which metrics you will use to measure the progress of your milestones. Let’s revisit our example to come up with a practical and quantifiable approach.

  • I want to pay down my loan by 20% each year.

Incorporating a measuring tool into your budgeting goal is to help you visualize your incremental progress. All progress is good progress, and periodically checking in is an excellent way to keep you motivated.

Attainable

You want to make your goal manageable and designed to be accomplished within an achievable timeframe.

To elaborate more, let’s go back to our example. We determined that to pay off a $50,000 student loan within 5 years, you must allocate $833.33 each month to the balance.

Before making this calculation, you would have gone over all your finances and determined how much you can adequately manage to pay each month. You would have determined you have an additional $833.33 each month, and you believe this will be manageable for the next five years. 

Relevant

Your goal should contribute to your broader, overreaching life goals.

Paying off your student loan will serve a high purpose; namely, it will free up more cash flow for you to put toward a more significant life goal. This could include buying your dream home, funding your retirement, or starting a business.

Time-Bound

To properly measure your success, you will need to have a well-defined deadline.

Answer these questions.

1) When will you start allocating monthly payments?

2) When do you anticipate the balance to be paid off?

In this example, you will begin making payments the following month for the next 60 months. You will check in every 12 months to ensure you haven’t missed payments and you’re still on track.

As illustrated above, breaking down your budgeting goal will make it much more manageable. Doing this will reduce the probability of failing to succeed with your goal. If you’re still struggling with creating a budget that works with your lifestyle, click here for a comprehensive guide for more clarity.

2: Give Up Leisure Activities & a Social Life is Difficult For You

When we set a budget, it’s generally in response to a distressed financial situation that needs to be addressed and improved. The most important thing to remember is that setting and reaching goals will enrich your future. Overcoming the irrational belief that we’re missing out on life is manageable to overcome and requires a few essential budget modifications.

Set Aside Money For Entertainment

If you’re someone who prefers to seek entertainment externally, you should always squeeze this into your budget. However, the most important thing to remember is to make sure it fits in your budget, and you’re not overdoing it with the expenses.

There is nothing wrong with combining a little pleasure with business if it means you will stay focused and on track.

For example: if you prefer to meet with friends a few Fridays a month, set aside a lean budget for it. If you typically spend $100 on a night out, slash that to $50. This way, you can squeeze in two per month.

Budget For A Small Vacation

Another challenge we often face with a long-term budget is the lack of vacation time. Vacations are critical to maintaining a healthy mindset and improving our physical wellbeing. Restricting ourselves from vacations while in the middle of a budget can increase the chances of throwing in the towel

so we can indulge in a relaxing getaway.

So don’t make this mistake. Remove this problem before it arises.

Take some extra time to incorporate mini-vacations directly into our budget. Below are a few tips to get you started.

  • Look for all-inclusive or discounted deals. Groupon is an excellent resource.
  • Plan vacations based upon what your budget can comfortably afford. Holidays don’t need to be lavish and expensive to give you the relaxation factor you’re seeking.
  • Schedule them into your life at healthy intervals.
  • Seek out inexpensive and close-to-home vacations. Camping is an excellent idea if you don’t have a problem with insects and a little dirt!

3: You Want Instant Results

When it comes to goal setting, it’s not uncommon for people to give up when they don’t see instant results. We’re all guilty of it! We don’t have the patience to wait for results, so we end up back at square one, over and over and over again. This is one of the biggest problems people face with any goal they set, be it financial, health, education, etc.

Ongoing research has indicated that delayed gratification is an indicator of overall life success because you learn to manage and implement realistic goals and make wiser choices. The best way to challenge this is to set short-term goals before tackling the long-term ones.

A few things to consider are:

  • Preplan for everything. You’re less likely to indulge in last-minute decisions when you already have plans and budgets in place.
  • In addition to your budget, consider utilizing a daily calendar that includes all your daily activities to keep you focused and on task. It’s much easier to fall prey to overspending and indulging when you have free time and an open budget.
  • Periodically remind yourself what your purpose is and what the end goal is. We often get consumed with life, and while we know we have goals, we forget why we set them.

While it’s challenging to overcome the desire for short-term gratification, preplanning and preparation are vital to overcoming it (and a dedicated mindset!)  It’s also helpful to remind yourself of the benefits that come with reaching your goals. If paying off a student loan can get you your dream home or the ability to travel frequently, remind yourself of this every day.  

The Bottom Line

To sum up, remember to keep your goals manageable and attainable. Start small, then move on to more extensive and complex budgeting goals. Lastly, constantly challenge your downfalls and impulses. Together, these recommendations will help you on your way to reaching any goal.

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