by D. Victor

Created on: December 28, 2008   Last Updated: May 30, 2009

Budgeting is part of a complete financial program. After all, a budget clearly defines how you will allocate your income stream. However, budgeting seems like a purely academic exercise to some persons. This attitude may cause and result in budget failure. Budget failure can occur in the process of budgeting or at its implementation. There are several reasons why budgets do not work for everyone.

1) Lack of adherence

Planning is one aspect, but if you do not actually implement the plan, then it would fail. Indiscipline is a major reason for budget failure. Not sticking to your plan could suggest that it wasn't a good one in the first place. However, a likely reason is that the budget was not adhered to. Bad financial habits (like impulse buying) and a poor attitude towards finance could be responsible for financial indiscipline.

2) Failure to link your budget with your financial goals

Budgeting should not occur "just because". It must be a systematic approach to achieving your financial objectives. Linking your budget to financial goals would further motivate you to stick to the budget. Failure to do this would leave the budgeting process as an arbitrary plan that has no root in your financial reality.

3) Unrealistic budgeting

Some people confuse goals with dreams. Those same people would use their budget as a wish list. They wish they could save $1000.00 per month or that they could eliminate their debt in six months. Like proper goals, a budget should be realistic. Indeed, a budget is merely a roadmap to your financial objectives. If a budget represents what you want to do instead of what you plan to do, it will fail.

4) Not budgeting in the context of financial planning

If you do not budget in the context of a complete financial program, you will be highly susceptible to unexpected occurrences and financial disasters. You may even be disciplined with your budget, but all with be in disarray if major medical expenses or heavy financial loss occur. Budgeting merely reinforces the aspects of good financial planning. If the financial wall that budgeting reinforces is not stable, the wall and the budget will come crashing down.

5) Not automating savings and payments

To err is human and we all have shortcomings. Budgeting is an ongoing process, so there are times when we may lapse or forget things. Automating your budget is one way to avoid falling prey to the lapses that can happen to the best of us. Those who do not automate their budget would have a harder time preventing budget failure.

A successful budget is one that is based on financial goals and one that you can stick to. Given the uncertainty of life and the prevailing attitudes towards finances, it is easy to understand why budgets fail. Still, knowing how easy it is for budget failure to occur can properly insulate you against budget failure.

Learn more about this author, D. Victor.
Click here to send this author comments or questions.