The following are four of the biggest obstacles I’ve come across when working with individuals and families who are trying to create a budget for the first time. These obstacles make it difficult, if not impossible, to create a budget and stick to it. Acknowledging the presence of these obstacles in your life is the first step. Remember, failing to plan is planning to fail!
1) Massive Debt
When creditors are coming after you and your priorities include shuffling balances from one 0% card to the next and avoiding finance charges whenever possible, the idea of a creating a “budget” can be daunting. Someone wrote me to say that they usually receive a large IRS refund in April and that she thought if she could just juggle payments until then that she would be able to make a big payment in April (tens of thousands of dollars) towards the credit card debt. She said “I’m not all that good with the monthly thing but usually I can pay it off then.” I asked her if she got that refund this year and applied it to last year’s credit card bill and she admitted she got a refund that large but did not apply it to the bill. Instead, she bought a new car. The credit bill is continuing to creep up. I encouraged her not to wait and see if the tax refund keeps pace with the credit card and to pay it off once and for all. Learning how to manage your money on a monthly basis is an important skill. Counting on an eternal income stream at your current level just seems like a recipe for trouble!
2) Uncooperative Partners
Sadly, I was contacted about this earlier this week and I’m not a marriage or finance counsellor so I hesitate to give advice about either topic. I feel fortunate to have a partner who shares many opinions with me about major life issues and who shares many of my values. This person once shared her partner’s values but no longer does. Doing the budget exercises and seeing where their spending was going made her see this. Her values now include security (retirement contributions), marriage (a wedding fund she’s started) and family planning (a savings account she would like to start). His still largely include new toys, alcohol, cigarettes, drugs and “going out with the boys” on a regular basis. This really calls for much larger decisions about the future than even a budget can handle. But, if in planning a budget, one has decided to tackle these larger life issues I am humbled and encouraged that with the significant time and energy into focusing on each person’s long term goals this couple can reconcile their relationship status along with their spending habits. And, if they do choose to part ways, they can do so before further intermingling their lives and assets.
3) Lacking Income
Some families are just trying to get by. They’re not steeped in debt but it happens because in order to meet basic living expenses they simply add a bit to the credit cards each month… over time this amount grows, finance charges eat into payments, and all of a sudden there is not enough income to cover the outgo. Others are living way above their means (see #4) or have been doing so and are just now realizing that the income can’t cover it comfortably each and every month. The only options here are to get another part-time job, get a better full-time job, or seek out other opportunities to make money in small amounts (weekend car washing, lawn mowing, and snow shoveling jobs come to mind) which can be used to fund the future.
4) Priorities out of Alignment with Spending
Someone recently contacted me and said “But our bills alone are $3000/month and we have little room left to payoff debt or invest for savings.” When we examined the individual’s monthly spending a bit closer we found nearly $600/month going to bars/clubs and the like. If that’s the priority, then no problem. But to consider fun money or play money to be “a bill” is incorrect in my opinion. Bills include things like a bare bones grocery budget, housing that’s not extravagant, basic utilities (lights, water, heat), and a basic mode of transportation with enough gas in the tank to get to and from work and the grocery store (bus, bike, subway, feet or car). Everything else is fluff and most of it CAN be eliminated and is therefore CHOICE as to how it’s spent. Of course, that’s just my opinion (though by the number of frugal finance blogs I’ve found on the internet I’d say my sentiments are shared by many and that some may even consider having one’s own apartment or car to be extravagant). Realigning your spending with your priorities is a difficult task and takes time. But, I find a greater freedom in choosing how I spend my money and directing it to those activities than the helpless feeling of opening the many white envelopes that arrive in my mailbox each month and paying them without a second thought!