I Have a Budget but Not the Money To Cover It — What Should I Do?
Written by
Yaël Bizouati-Kennedy
Edited by
Chris Cluff
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Having — and sticking to — a budget is a crucial component and a steppingstone in achieving financial well-being. Yet, 30% of Americans don’t budget because they simply don’t think they need this tool, with 24% of them saying they believe they won’t stick to it and 10% saying they don’t know how to get started, according to a survey by Credit.com.
Now, for those who follow a budget and stick to it, there can be another set of issues, such as still not being able to make ends meet.
“If you have a budget and have been sticking to it and still having trouble, there is a systemic issue that needs to be addressed,” said Jay Zigmont, Ph.D., MBA, CFP, founder of Childfree Wealth.
According to Zigmont, the first step is to do a “needs versus wants” analysis by adding up all of your basic needs each month, which include housing, utilities, insurance, groceries and any other bills you are required to pay each month.
“If your take-home [pay] does not cover your basic needs, you are in a crisis and something needs to change immediately,” he said. “You will need to make a drastic change to increase your income or lower your expenses, but there tends not to be much to cut from basic needs.”
Here are some additional steps you might want to take to help navigate this situation, according to experts.
Widen the Gap Between Income and Expenses
There is only so much we can cut from our expenses, so the important concept is to work on widening the gap between your income and expenses, and taking a two-part approach can help give you more breathing room in your budget, according to Jessica Morgan, founder and CEO of Canadian Budget.
“The first step is to try to reduce expenses,” Morgan said. “This can come in the form of negotiating bills with service providers, cancelling subscriptions or services that aren’t essential, shopping at a discount grocery store or consolidating debts at a lower interest rate.”
On the other side of things, to increase your income, you can look at steps such as asking for a raise, taking on additional work at your 9-5 or adding a part-time job. She also recommended decluttering and selling household items you no longer need, or starting a side hustle with a skill you have that others could benefit from.
Develop Frugal Habits and Change Your Lifestyle
Along with the suitable budget plans, it’s time to map out some frugal lifestyles, said Andy Cooper, financial analyst at CouponBirds.
“Although spending on necessities is inevitable,” he said, “you can always find ways to save money on them.”
And when struggling to make your budget work, often the mathematically easiest — but psychologically perhaps the toughest — is to change your living situation by either downsizing or moving further out to a more rural area, for instance, said Carla Adams, founder and financial advisor at Ametrine Wealth.
“Moving into a physically smaller space will not only typically decrease your monthly housing payment,” Adams said, “but will also usually mean lowering your gas and electric bills.”
She contended that coming to terms with the fact that you are not able to live within your means and having to commit to a possibly drastic lifestyle change is not easy to accept.
“But ultimately your life will become far less stressful once you are in a place where you are no longer struggling to pay the bills,” she said. “Finally, remember that where you are now in life is not where you will forever be. When you can make changes to your lifestyle and budget so that you are living within your means and able to start saving, you are creating a new beginning for yourself.”
Make Tough Choices
Finally, some experts argue that if you don’t have the money to cover your budget, you need to circle back and make some tough choices.
“This may sound harsh, but if the numbers don’t work, it’s not a budget; it’s a spending wish list that doesn’t line up with your financial resources,” said Bobbi Rebell, CFP, founder of Financial Wellness Strategies and author of “Launching Financial Grownups: Live Your Richest Life by Helping Your (Almost) Adult Kids Be Everyday Money Smart.”
Rebell recommended cutting it down to zero and building up from there, starting with the most essential.
“Think carefully about what is necessary,” she said. “You may have to make some choices that are uncomfortable to get back on track.”
Finally, Rebell said that if the numbers “are truly out of whack” and you can’t increase your income you may be faced with hard choices to lower your ongoing overhead.
“That could mean moving to a lower cost area,” she said, “or getting rid of a car and carpooling more or using more public transportation.”
Be Proactive and Track Your Spending, Realistically
According to Morgan, if you struggle to get your budget to cover all of your monthly expenses, your budget may not be based on a realistic picture of your costs and spending.
“Take a weekend to review your last few months’ bills and expenses – and if you have been budgeting — reflect on which areas were constantly over budget to see what needs revising,” she said.
Morgan added that the most common problem of budgets “not working” is that people aren’t tracking what they spend on an ongoing basis and building their budget based on those realistic numbers.
For instance, reviewing your spending at the end of the month doesn’t help you stay on budget; it just makes you feel bad when you overspend, she said.
“Changing budgeting from being a reflective to a proactive process makes a huge difference!” she said “Tracking spending as you go can help you course correct before it’s too late. If you notice one spending area is higher, you have time to adjust the other spending areas in your budget to balance it out.”
