Five ways to know your budget is broken

Five ways to know your budget is broken.

Having a budget is the first step toward financial freedom, security and success. But just creating a budget isn’t enough – it has to be a budget you can stick with; one that works for you, not against you. Here are five signs that it’s time to re-evaluate your budget.

Consistent monthly financial restructuring

Everything seems fine and dandy at the beginning of a new month. But as the weeks pass, things begin to change. You might be overspending in certain categories or dealing with unexpected costs, but whatever the reason, towards the end of the month, you are forced to make major changes in your budget.

Remember, your budget should keep you in line and on track from the first of the month until the last day of the month. If you consistently find yourself having to make changes, just to make ends meet, something isn’t working out.

Tip: Take a look at your budget every time you write out a check, use cash or make a purchase with your debit card. This will ensure that you stay on track throughout the month.

Over reliance on credit

Using credit cards if you are responsible enough to pay off the balance monthly isn’t a problem. But a problem does arise when someone relies solely on credit to get by. If your budget is broken, you may notice you depend upon your credit cards to make ends meet, especially at the end of the month. This is a telltale sign that your budget is in desperate need of attention, and should not be ignored.

Your books never balance

The money that you have at the beginning of the month needs to cover your expenses until the end of the month. Your budget and accounting system should appropriately reflect this. If they don’t, it may not seem like a big deal at first. But the risk is that a long-term imbalance in your books will become a massive issue.

Increasing financial fights with your partner

A bad financial situation can begin to take a negative toll on your life and relationships. “Your budget never works;” “We never have any money;” or “Why do we keep spending money on this?” are phrases that might come up if you’re consistently fighting with your partner about your finances.

Instead of “we never have any money,” you should focus on “why don’t we have any money?” This gives you the chance to work together to find a solution.

Always borrowing money from friends and family

This sign, above all else, is one of desperation. Taking money from a retirement account should never be an option, as the penalties can be very high and a large financial blow. Along with this, borrowing money from friends and family runs the risk of souring your relationships. This is something that can have a negative effect on your budget, as well as your relationships with other people.

As tempting as it may be, borrowing from friends or family, or taking money from your savings or retirement is a mistake. Make a rule: you will only do this under the most desperate of times, and if you have exercised all other options. If you need to borrow money to eat and pay the rent, so be it. If you need to borrow money to go to the movies and dinner, you are out of luck.

The final word

Living with a broken budget can damage not only your finances, but also your relationships with those around you. So, it’s important to be able to pick out the signs of a cracked budget in order to implement the changes that will fix it in the long run.

Source: smartmoneydaily.com