3 Common Budgeting Challenges to Overcome

Budgeting challenges don’t have to keep you from getting the job done. A budget is simply a set of guidelines to help you manage your money. Once you set up your system, budgeting isn’t even that much work. If yours isn’t working for you, then scrap it and start again. But don’t be stopped before you start by challenges that you can easily overcome. 

Key Takeaways

• Making and maintaining a budget plan can help pave the way for a healthy financial future.
• Don’t feel you have to track every single penny if that is overwhelming.
• Keeping track of what you plan to spend vs. what you actually spend each month can help you adjust your budget.
• Budgeting apps or software programs can be useful tools for tracking expenditures.

Challenge #1: The All-or-Nothing Mindset

Many people are turned off by budgeting because most advice about creating one requires tracking every penny spent for three months. That is a lot of saving receipts and tracking, especially if you aren’t using an automatic system. The point of a budget is to get a picture of your expenses and plan for your financial goals—in other words, it is a tool for you and you alone—and if tracking every penny is a roadblock to getting you started, cut yourself some slack.

Having a general idea of your income and major expenses is a good first step toward creating a budget. Common spending categories include:

• Rent / Mortgage
• Utilities
• Phone/Internet
• Transportation
• Insurance
• Groceries
• Car Payments
• Childcare
• Loans or Debts
• Clothing
• Entertainment
• Dining Out
• Travel
• Charity
• Savings 

If you tally up roughly what you spend for each of these categories (or what you would like to spend)—and it is less than your income—then it is fine to track your large expense categories and leave out the occasional lunch or impulse purchase. If you find that you’re overspending, you need to reassess and set a stricter budget.

Important

Some experts suggest not using credit cards when you are on a budget unless you are able to pay off the full balance each month.

Challenge #2: Labor-Intensive Tracking

As mentioned above, common budgeting advice requires you to track all of your receipts and spending for multiple months. You can do this on paper or on a spreadsheet, but there are easier ways. A variety of apps and computer programs will track your spending and categorize it. This can help you make progress towards your financial goals.

In different ways, these apps monitor your bank accounts, credit card transactions, and even investments and retirement planning. Some also allow you to set spending goals.

Challenge #3: Paying in Cash 

It has been proven that people who use cash rather than credit spend less overall. The big hurdle is that spending cash makes sticking to a tight budget very challenging because to track your spending you have to manually tally up receipts. There are a few ways to stick to a budget while avoiding credit cards.

One method is known as the envelope method. You take your spending money out of the bank at the start of the month and divide it into envelopes. When the grocery envelope is empty, that’s it for the month–although you can always borrow from the other envelopes in an emergency. (It’s better, however, to have an emergency fund.)

Note: Some monthly bills will still be paid directly from your bank account (or by check), such as rent, car payments, credit card payments, and utilities.

A less complicated version of this method is when you designate a specific cash amount for variable expenses and miscellaneous purchases and put that in one place. Instead of tracking every cup of coffee or dinner out, use your cash on hand to guide your general spending. The fund can be designed for whatever time period works best for you: weekly, biweekly, or monthly. Just coordinate it with the big monthly bills. This second approach could also work with a debit card if you carefully track what you spend.

How Much Debt Do Consumers Have Nationally?

Personal debt in the U.S. is soaring. In September 2024, the Federal Reserve’s data revealed that collective personal debt tops $5 trillion, with revolving debt (such as credit card debt) at $1.32 trillion.

What Is a Budget?

A budget is a spending plan that you use to keep track of and allocate your money. It typically covers one month, but it can cover whatever interval of time you choose.

What Is the Envelope Method for Budgeting?

The envelope method of budgeting is where you make a budget, and then take cash and stuff it into envelopes. Each envelope represents a certain category. For example, if you budgeted $200 a month for dining out, then you would place $200 in cash in an envelope labeled “Dining Out.”

What Is 50 / 30 / 20?

50 / 30 / 20 is a budget that allocates a certain amount to specific categories. In this case, 50% of your budget goes towards necessities, 30% goes towards wants, and 20% goes towards savings. For this budget to be successful, you need to know how to separate your wants from your needs.

The Bottom Line

Budgeting can seem scary, labor-intensive, and challenging, especially for those who use cash. The most important thing to remember is that it is a tool for you, and if you go awry one month, you can just try again the next. And don’t be afraid to change your budget if it isn’t working. Use the above tips and you should be well on your way to finding a financial plan that fits your lifestyle.