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Failure. Don't you just
hate to fail? Especially when you've invested time and effort into a project. But it
happens all the time. Especially for people who are starting to take control of their
finances. So we thought we'd take a look at why budgets fail.
When you analyze it, there are really three reasons why people are unsuccessful in
budgeting. The most common causes of failure are unrealistic goals, quitting too soon and
misunderstanding what a budget really is. Let's take a look at each one of these reasons
separately. Then we'll show you how the same solution can overcome all three problems.
It's easy to fall into our first failure trap. In fact, in some ways it's hard to avoid
it. That's because it's built right into the process. Our first step in starting a budget
is to add up all our income and also all our expenses. Then we try to juggle the two until
we get the income equal to the expenses. It's a game of getting the math to work out.
What's wrong with that? Well, quite often, we take the list of expenses and pick a number
that just seems right. For instance, we might decide that we can live on a grocery budget
of $200 per month. But, if that target is just a guess, it's probably the wrong number.
And, if we reduced it to get the expenses below our income, it's probably too low.
So now we put the budget into practice. Then we get near the end of the first month.
There's a week left to go and we've already spend our budgeted $200. Out comes the credit
card and we begin to curse our budget.
But, what's really happened here? We set up a target that's unrealistic and missed it.
So what. That doesn't mean that our budget won't work. It just means that we need to set a
more realistic target. In fact, we're in a better position now to accomplish that because
we have a better idea of what we actually do spend on groceries. No more guesses. This is
no time to quit. Rather it's an opportunity to make adjustments and keep moving towards
our goal of having control of our finances.
The second common cause of failure is similar. That's quitting too soon. Say you've been
trying to use a budget for a couple of months. You've done all the math and kept track of
both the money coming into your home and where you spend it. You've worked hard on this.
Yet you always seem to get to the end of your money before the month is over. Frustration
sets in. The temptation is to throw in the towel and give up. A perfectly understandable
response.
But it's the wrong answer. Look at it this way. Suppose you were driving to Disneyworld
and about half way there you realized that you had made a wrong turn and had driven 50
miles off your planned route. Would you quit and go home? Of course not! So why should we
give up on a budget just because everything doesn't work perfectly the first few months?
Do the same thing that you'd do on your vacation. Look at your map and adjust your route
to find the best way to reach your destination. Make the adjustment and move forward.
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