Why Isn't Your Budget Working? Common Mistakes & Solutions

If you're struggling to stick to your budget, it may be time to make some changes.

Following a budget is one of the best things you can do for your finances. With a budget in place, you'll be more likely to avoid debt, add to your savings, and meet whatever goals you set for yourself.

But what if your budget isn't working for you? What if you keep going over it or failing to stick to it? If that's the case, these could be the reasons why.

1. Your budget isn't based on actual data

A budget that's thrown together based on guesses about what your bills look like won't do you much good. Rather, it needs to be accurate for it to work.

Before you give up on budgeting, spend some time looking through your bank and credit card statements from the past year. That should help you not only identify all of your recurring and one-off expenses, but also help you accurately estimate what they cost.

2. You keep setting a budget and forgetting about it

Your living expenses can change over time, such as if your rent goes up or you switch to a different cell phone provider that costs more than your old one. And sometimes, your living costs can change in your favor, such as if you pay off your car and no longer have an auto loan hanging over your head.

Either way, your budget is something you'll need to revisit every three to six months, or after major changes to your personal finances occur (such as if you pay off a loan or unload a large expense). Be sure to update your budget accordingly. Otherwise, it may not do you much good.

3. Your budget leaves you no wiggle room for added expenses

You might think that as long as your various expenses don't exceed the amount of money you take home in your paychecks, you're all set from a budgeting perspective. But that's not so.

You should not be spending every last dollar you earn for a couple of reasons. First, if you go that route, you'll have no money left over to add to your savings. Also, if you spend every penny you bring in, you'll have zero flexibility for emergencies or other unexpected expenses.

Say your good friend gets engaged and you're invited to a celebratory dinner you need to bring a gift to. If you don't have a spare $50 to work with in your budget, you may have to put that gift on a credit card and pay it off later, all the while accruing interest. A better bet is to leave yourself some wiggle room in your budget. That way, you can either add that extra cash to your savings or use it to cover unplanned bills that shouldn't really warrant an emergency fund withdrawal, like a gift for a friend.

Following a budget could put you in a great spot financially -- but only if that budget is realistic and you're able to stick to it. If that's not the case, figure out why that is and rework that budget so it does the job it's supposed to.