Reasons Your Budget Isn’t Working

Why Budgets Don’t Work. 

It’s a new year with new goals. As you enter 2023, you may be tempted to create and follow a tight budget. After all, we’ve spent a little too much over the holiday season with parties and gifts galore.  

So, we tell ourselves now is the time to create new resolutions and stick to them.  

We all want to see our savings account increase and our debt decrease, but what if budgeting isn’t the most effective way of accomplishing this goal? As your financial freedom coach, Meru Mentor can help you manage your spending habits.

Budgets are Restrictive  

Budgets are like diets. We have big dreams of them changing our habits and improving our lives, but they always seem to fail. Your budgeting plan is likely to fail because it is too restrictive. When you put constraints on your spending, it causes you to want to push back. Instead of a healthy boundary, you feel unable to live your life and make the purchases you want or need.  

Of course, this is not a time to go on a shopping spree, especially when money is tight. However, you are still able to work on your financial goals by being conscious of your spending. 

Conscious Spending vs. Budgeting 

To solve our financial issues, we will first need to be conscious of our spending habits and patterns. Forcing ourselves to be aware of where our money is going will be more effective than creating a tight budget that is impossible to follow.  

Here are a few steps to help you get started as you work towards being more conscious of your spending: 

  • Write out your goals or financial needs. Are you looking to get out of debt, buy a new vehicle, or save up for a vacation?  
  • Track where your money is going each month. 
  • Ask yourself whether what you’re purchasing is a want or need. Will you be happy with your purchase in the next week or two?  
  • What do you need to do to accomplish these goals? Will you need to reduce spending, get a side job, or get a promotion? 

There is no right or wrong way to go about conscious spending. The goal is to be aware of your spending habits to make the best choice for your financial goals and begin working towards them with confidence. 

Benefits of a Spend Analysis

Analyzing your spending will give you a better idea of where your money goes each month. A spend analysis is helpful before and after you’ve started spending more consciously. Look back at bank statements to analyze how much you have spent on eating out, groceries, gas, miscellaneous fun, and more.  

Analyzing your spending will help you: 

  • Increase awareness of your spending habits 
  • Reduce unnecessary spending 
  • Inform future financial decisions 
  • Find more opportunities to save  

An Effective Alternative to Traditional Budgeting  

Budgeting works for some, but the truth of the matter is that 66% of Americans are living paycheck-to-paycheck. When you feel like you have no money to move around, budgeting is only setting you up to fail and will cause you to give up too soon. Instead, approaching spending with the mindset of transparency will increase your responsibility.  

The most effective spending strategy is to be aware of where you are spending your money and how to reduce unnecessary spending while also periodically checking in with your financial standing. This will help you create much healthier spending strategies, setting you up for success in the long run. A holistic approach to your spending makes it easier to manage your habits.

If you’re looking for support as you begin to track and analyze your spending habits, contact Meru Mentor today for a free consultation. We can guide you toward the life you desire with financial advisor coaching.

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