I know so many intelligent people who understand how to budget, yet find it impossible to take action and stick to a budget.
Budgeting also forces you to confront financial reality – it helps you understand your current financial situation, and may even provide some motivation to increase your balance of savings and investments.
In this blog, I will address some FAQs about budgeting which should help you reach your financial goals:
What are some personal experiences people have with budgeting challenges?
There are many personal experiences which affect people when budgeting.
Budgeting is simple, but not easy. We live in a consumer society and there is great pressure on individuals to consume more than they need.
Moreover, the rising cost of living and wage depression have become serious challenges to savers across the Western world over time.
First, it is critical to emphasise that budgeting is easier for some than others—both practically and psychologically.
Budgeting is not a magic pill. It can be really important for someone who is not in control of their spending, but setting a budget will not solve issues when someone has, too low of an income, although it does allow people to understand when they earn too little.
The practice of budgeting can lead to important and transformative realisations when people review their finances. For instance, I’ve recently discovered that I spent around £300 eating out and on coffee last month.
Although I don’t want to reduce this amount to zero next month, being aware of this figure can help inform my spending and make me consider my decisions more carefully in the future.
How does one’s mindset affect their success in budgeting?
Having the right mindset when it comes to budgeting is crucial to success in budgeting.
It can be helpful to not think about a budget as merely a restriction on spending.
Rather, think of it as permission to spend your money on things that matter most to you.
The famous wealth guru, Ramit Sethi, who wrote “I Will Teach You to be Rich”, makes the point that people need to choose the things in life that they value the most, and not deprive themselves of them – what’s the point of money if it can’t give you some access to the things that matter to you.
Reframing your mindset to think of budgeting as an activity which can bring you closer to the things in life that you value can transform your understanding and increase the chances that you will hit your budgeting goals.
What strategies have helped others overcome budgeting failures?
The 4 main strategies that help people overcome budgeting failures are:
- Tracking expenses
- Paying yourself first
- Setting realistic goals
- Building an emergency fund
First, tracking expenses is a key way to understand your spending and regular payments. Budgets only work when they are grounded in reality, and carefully tracking all your expenses builds an accurate picture of your finances.
Paying yourself first is simply the principle that you automate any investments and savings as soon as you get your salary. This is very easy to do in the modern world, as it is easy to set up a standing/direct debit into your investment or savings account. The reason why it is so powerful is that you cannot miss what you cannot see. If savings and investments go into accounts automatically, you do not miss what you do not see. It’s a bit like running a bath and then spending some time doing something else, before coming back and finding your bath full. I find it incredible that if I leave my portfolio and savings to do their thing and do not check them for a while, the growth will often be far greater than I expect.
Setting realistic goals makes it far easier to reach them. If you set unrealistic expectations that you are not able to meet, then you will be disheartened and lose hope. The worst thing is that this loss of hope will often make you feel powerless. If you feel powerless, how can you strive to improve your finances in the future and build wealth?
Building an emergency fund is a proactive measure that anyone can take to help them reach their budgeting goals. Why is an emergency fund so essential? You need some cushion if unforeseen expenses come up. You are planning for these events. I’d even recommend that someone approaching retirement age should build up a buffer of a few years in savings in case of a market drawdown in early retirement. Most financial advisers recommend 3 to 6 months, but everyone should have a starter emergency fund of £1000, or $1000 for US readers.
How can someone make budgeting feel less restrictive and more empowering?
Budgeting can be made to feel less restrictive and more empowering by ensuring that any fun money is budgeted for. Your life is not just a long list of needs. You also will want certain things and budgeting can play an important role in turning those dreams into reality.
Make sure that you include those things that you want in your budget too. For instance, I always set aside money for holidays. Per month it does not amount to much of my overall budget, but if I wanted to take a trip somewhere, my budget accounts for this life luxury.
Remember, you have certain things in your life that you value more than others, so make sure that you personalise to maximise the value you get out of your budget.
What role do lifestyle changes play in successful budgeting?
Understanding lifestyle changes and how they can affect your budget is critical to budgeting success.
Many people build budgets to suit their lifestyle at a particular time, but as life circumstances change, you need to update your budget to suit your new circumstances. Lifestyle inflation in particular is a critical issue that many people struggle with – as their salary goes up, their spending rises, but sometimes out of control.
Other circumstances that may affect people’s ability to budget include having and raising children or other dependents, pets, buying a house and maintaining it etc.
Is it necessary to track every single expense to stay within a budget?
It is critical to track every single expense to create an accurate budget. In modern times, it is easy to track your expenses and build an accurate picture of your finances using banking apps and exporting CSV data.
Some modern challenger banking apps such as Monzo allow you to allocate expenses and visualise your data. Having your budget down to the penny allows you to be intentional with your money which is both empowering and critical to making better choices.
Budget Spreadsheet Template
This budgeting tool is what I use to track my spending and income month-by-month. It’s a great tool for understanding your personal finances.
Can budgeting work for people with fluctuating incomes?
Yes, budgeting can work with fluctuating incomes, however, you should always work within the lower range of what you expect to come in each month. If your income fluctuates wildly because work is seasonal, you need to allocate far more money to savings in order to build a buffer against uncertainty.
Does budgeting mean you can’t have any ‘fun money’?
You should always budget for fun. Fun money or discretionary spending is a vital component of any budget. What’s the point of making money if is isn’t spent on the things that you value?
If you do not budget for fun, then your budget will be boring, unrealistic and uninspiring.
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Is it better to review a budget weekly or monthly?
Budgeting weekly or monthly is a personal choice.
You may wish to adopt an approach based on the regularity of your income.
For instance, if you receive your income at the start or end of the month, then adopting a monthly budget would make sense. However, if your income comes in at different times of the month, then you should consider budgeting weekly as this fits well with the pattern of pay.
Some people may even wish to budget bi-monthly, as there are some jobs where there are bi-monthly payments made into your bank account.
Are budgeting apps more effective than traditional pen-and-paper budgeting?
Budgeting apps are faster and more efficient than traditional pen-and-paper budgeting, but for some people, a pen-and-paper budget could work better. I propose, however, that people take a hybrid approach to budgeting for maximum impact.
Honestly, there are a lot of budget apps which are usually more honest and accurate than people, however, if you are used to working with Excel or Google Sheets, making a budget is technically straightforward and easy.
The financial coach, Aliana Fingal, the founder of Organized Money, believes that her clients are able to stick to their budgets precisely because writing down a budget with pen and paper connects people more to what they learn and helps them understand their money better. It’s a bit like the difference between spending dollar bills and swiping a credit card – analogue is often more emotionally impactful than digital.
There is a lot of data that indicates how writing things down helps people understand and connect more to what they have learnt.
Using a hybrid approach to budgeting works well because it allows you to make sense of your expenses digitally ensuring maximum accuracy, but then spending time putting your actual budget to pen and paper connects you to the emotional side of finance which improves the odds of success.
Conclusion
Budgeting isn’t just about limiting expenses; it’s about understanding and prioritising what matters most in your life.
By reframing budgeting as a tool for freedom rather than restriction, you create a financial path that aligns with your values and goals.
Remember, budgeting success isn’t about perfection—it’s about consistency, adjusting to life’s changes, and maintaining a realistic, flexible plan that supports your dreams and needs.
Start small, stay aware, and let budgeting empower you to make intentional financial choices that pave the way toward a more secure and fulfilling future.
