How to Fix Broken Budget

Raise your hand if you currently have a budget.

Now, keep your hand up if you’re following that budget.

OK, what about that same show of hands if you’re able to save money as part of the first two points? If you’re hand is still up, congratulations, you’re obviously deeply rooted in not only having a budget but one that you’re paying close attention to, adjusting and actually saving money as a result.

You are, in fact, the exception rather than the rule.

That’s because saving money and following a budget, once a rite of passage for individuals and families alike has transformed into more of a balancing act, one that has produced lots of idle chatter about budgeting as a topic of contention but very little in the way of tangible results.

A whopping 69 percent of Americans have less than $1,000 saved, while 34 percent have nothing at all set aside in a savings account or labeled emergency fund.^[1]

The number is shocking, if not downright frightening when you consider the idea of home repairs, issues with your vehicle, medical bills that pop up or any number of “what ifs” that the average person faces, while not daily, at some point in their lifetime.

Even more challenging are those who don’t have any money saved and come across these life-changing and altering events, and have no choice but to borrow money, use high-interest credit cards and only find themselves in a more unwanted situation with adding to whatever debt they already have.

Roughly 79 percent of the American population owns a credit card, and the average debt per cardholder is around $4,000.^[2] Are you able to say that is the case with your budget. But “needs,” everything else is up for debate.

One of the more popular expenses that has seen a dramatic drop off due to price hikes and viable, cheaper alternatives is cable television.

The average cable bill is at $100 per month.^[3]

With such companies as Netflix, Hulu and even networks who are launching their own streaming channels for mass consumption, the idea of paying $100 or more per month is silly, and money not well spent.

That’s why the growing distain for cable and satellite has translated into 22 million people having cut cable in 2017, up from the 2016 total of 16 million.^[4]

In addition, and not to pick on cable specifically, you have other ways of minimizing your expenses without actually getting rid of what you’re already paying for, but rather is more about paying less. That goes for car insurance, clothing, entertainment costs, vacations and even your transportation.

If you’re someone who commutes quite a bit for work, for example, and you’re putting countless miles on your vehicle, you might want to minimize or almost eliminate the cost of fuel, for example.

The cost of one gallon gas was higher in 2017 than it was since 2014.^[5]You might want to consider commuting via car pools, public transportation or even finding a better vehicle on fuel economy.

The reason why most budgets fail to work is that you don’t want to compromise on expenses, and feel like you can justify what you’re spending. The other piece is not wanting to put in any additional work on trying to make the changes that are a must.

Learning to Buy: Why when you buy is just as important as what

Everyone has a friend, family member or co-worker that spends money almost all the time, and yet they still find ways to save.

As much as this person is a wonder to you, aren't you pretty sure that you're jealous of them? How do they pull this off?

While this can be anything from frustrating to appealing as far as the spectrum of awe is concerned, if you want to fix your budget, you absolutely need to cut expenses or change what you’re spending your money on, but that doesn’t mean you can never buy a new outfit or decoration ever again.

The real key is learning to spend properly, and not so much just what you buy but when.

Did you know the best day of the year, on average, to buy clothes is December 26?

Also, the day of the week matters, too.

For example, shoppers save about 55 percent off on Monday when it comes to men’s and women’s pants, while you can expect to save about 42 percent off jewelry if you buy on a Friday ^[6]

You’ll get the best deal on a gym membership in January, and you should be buying winter clothes at the end of winter, and summer clothes in August or September, the end of the season.

You’ll save up to 50-70 percent off holiday decorations if you wait until after the holidays, so that you can enjoy them the following season (and seasons to come).^[7]

And if you’re in the market for what you would consider a need, like a car, mattress or laptop, you always have the option of waiting for the best time to buy, too.

A mattress, for example, should be purchased on holiday sales or in May.^[8]

The car business almost exclusively opens up better deals when you go at the end of the month, as sales people tend to be more lenient based on wanting to wrap up the month with additional sales and subsequent commission. Go at the end of the month, or toward the end of the year.

December is the month that offers some of the more enticing and substantial discounts for car buyers, roughly 7.7 percent, more than any other month and just edging out January at 6.8 percent.^[9]

Again, this isn’t a full-scale, outright plea to start spending money but if you have to spend it, why not do it when it makes the most sense?

Part of what makes budgeting that important is knowing how to cut expenses but also strike up a sale or purchase when it means the most in the way of savings.

Small Wonders: Why budgeting needs to be realistic and really specific with everything

What tends to get lost in the budgeting process are two very important aspects of the process in general: realism and really, the little things.

Budgeting often is looked upon as a make or break endeavor and something that you have to do, much like exercise.

When was the last time you heard someone excited about going to the gym? Sure, it happens, but it’s not exactly like planning on summer vacation, either.

That’s why you need to ensure your budget is realistic. Much like exercise, when you say you’re going to work out 5 days a week and only eat carrot sticks, and then fail, your budget can backfire just the same.

Those who quit the gym in February after January’s New Year’s Resolutions because they made this too hard on themselves, might also want to heed that advice budgeting wise.

A budget has to have some allotted money that goes to entertainment, fun and other elements that make it not seem like so much work.

On average, a household that earns $63,000 spends about 4 percent on entertainment, and 1 percent on vices, which equates to about $2500 per year and $775 per year, respectively.^[10]

This is encouraging in some respects given that your budget can’t be something that is rigid to the point that it’s only about paying bills. Using the 50-30-20 budget rule the 30 is signifies 30 percent toward having fun.

Granted, that number can be adjusted if your budget needs are that you’re over budget and aren’t able to pay your bills, but that’s typically a good number to draw from when you’re crafting a realistic budget.

As far as the small things, you can’t overlook the aforementioned vices, like if you’re buying a pack of cigarettes per day or can’t help but eat lunch out at a restaurant instead of brown bagging it.

You’ll spend about $70 per week, or $280 per month on cigarettes, a significant cost if you’re not putting that into your budget.^[11]

Lunch alone, too, is a big-time budget breaker if you’re not paying attention. On average, you spend just over $1,000 ($1,043) on just lunch, translated into about $20 per week.^[12]

In some cases, individual spend that in one day just for food, meanwhile having a full fridge at home.

Not having a budget certainly stands as an option, but isn’t something talked about as a means to save money. That’s because there truly is money in planning, and that can’t be denied.

Those who opt to go minus a budget certainly believe in their ability to manage money without holding themselves accountable.

Then again, you have to remember that living paycheck to paycheck has become all too much of a reality for the masses, since 76 percent of people follow that means of “budgeting.”^[13]

Falling into that trap of sorts is easy to do, mostly for those who actually aren’t making enough in income to support their expenses. And with that, you’re at a financial crossroads: make more in the way of income or find a way to eliminate expenses.

And without a budget, you really don’t have much in the way of a financial barometer to go by, and the paycheck to paycheck remains a constant you aren’t going to want.

Arguably just as daunting as not having a budget is relying and maintaining one that isn’t working.

Thankfully, you can keep that hand raised proudly by making a few budgetary moves and having a check and balanced system that is just that: balanced, and thus leading to you being able to enjoy the end result of planning.

Having something to show for it.