Breaking bad budget habits (+ free worksheet!)

Red. Glaring, bright red.  That's where we ended up on one of our spending categories in our budget for the end of the year.  Yes, dear reader, I'm confessing that I don't keep to my budget perfectly!  And with the start of a new year, one of my New Year's Goals is to not be in the red at the end of this year. 

My husband is a PhD student and what do PhD students need and want a lot of? Books. Lots and lots of books, usually from Amazon if they can't be obtained through the library system he has access to.  Which books he needs and how much they will cost is not very predictable given his stage of the program and he needs them to be successful.  Added to that, he is also an avid reader for fun (when he has time) and also purchases those books through Amazon.

We've known for a few months that our system for keeping tabs on what books are for school, what books are for his personal use, and setting the budget for school books just didn't work this year. 

We spent a lot of time last year trying to make our system work, but it just didn't.  It's broken and we need to fix it together because we share equal responsibility for making budgeting and spending decisions for our money. No separate bank accounts in our family!

break your bad budget habits

We (and you) aren't alone

We also spent time with some dear friends of ours over the holidays and they shared with me that their own system for keeping a budget isn't working.  In their family, he keeps track of the budget using Mint as it mostly meets his needs but it isn't as useful for her. t's been a source of mutual frustration especially as they have big financial goals including wanting to buy a new home. 

If your budget is broken, only you can fix it.

I would bet that everyone has at least one area of their budget that is troublesome. And some of us have many areas. And a few of you may have your head in the sand about your finances and you don't even have a budget.  (See The rent is too d@&* high! How to budget for life in a new place. for details on how to create a budget.)

But keep in mind that you are in control. You set the budget and you get to tell it what to do. You decide how to spend or not spend money. Easier said than done, right? 

In order to fix your budget, you have to identify the root cause and it's probably not your math skills.  Here are 3 common reasons why your budget is broken and how you can fix it.

1. You aren't budgeting enough

I'll assume that you are overspending in a budget category.  (Your budget could also be broken in that you aren't investing enough.)  Are you putting enough money into that category to cover your expenses? If are trying to spend $80 a month on groceries, that may not be doable unless you have a well-producing and diverse garden in your backyard.  So you may need to increase your funds there.

We faced this in our groceries budget when we moved to a really expensive city and grew our family.  I thought I could keep our spending low, but found that month after month we just couldn't do it without living on rice and beans and having our kids revolt against us. So I increased it from $260 to $340 a month.  (Yes, a family of 4 can eat well on $340 a month!) 

You'll know this is probably the case if you consistently try to come in at your budget but can't seem to do it no matter how much you try to cut down. Do yourself a favor and increase it and find other areas to cut back on.

2. Your habits don't match your budget

What may be more likely is you have a reasonable budget for a category, but you just. keep. blowing. it.  Drinks out with friends? Vacations? Restaurants? Coffee? Amazon?  These really are all non-essential to your existence. And no you can't convince me otherwise.

Successful money management is all about building and reinforcing the right habits.  You just need to retrain your spending habits where you keeping going overboard. But here's the good news. Chances are you don't have many categories where your spending is on the verge of being or is out of control, which means you don't have a lot of habits to change. 

Know thyself. Know what your triggers are and put up obstacles so that you can't overspend. Always tempted to order one more drink? Leave your credit card at home and only bring cash to the bar so that you'll be limited in what you can order.  Turn off 1-click ordering for Amazon so that you have a few more screens to navigate befor you click Purchase. 

3. You set it and forget it

Budgets only work when you keep up with them and know where your money is going. Unless you have an exceptional memory and can keep a running total of all your spending and earnings in your head, you need to check your budget more than once a month to avoid getting off track.

I still check my budget on a weekly basis, and I've been doing this for 7 years. I'm a financial nerd, so other people who have their budget under control may not need (or want) to do this as often. But if you are just starting out or have several areas that you need to get your spending under control, then I recommend you schedule a little date with your budget each week to make sure it's up-to-date and you know where you are approaching your limits. It's okay to change it midstream if something unexpected happens, but don't forget to decrease your spending elsewhere.

So what is our root cause for our overspending on books? The first one - we didn't have enough in our books category. We increased it for this year and will invest a little bit less in mutual funds.

And our friends? They were setting and forgetting their budget. To overcome this, they agreed on a new budget system to help her stay in the loop and they are having weekly budget discussions together to avoid getting off track. I can't wait to hear how that works for them.

Do you have other causes of a broken budget? How did you fix it? Share below!

Free Worksheet

Ready for the free worksheet to help you identify and make a plan to fix the root cause of your budget woes? Subscribers, you can jump to the subscribers-only page to access it. You'll need the password that was emailed to you - let me know if you've misplaced it! (lindsey (at) changetherace.com) 

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