Include “false Factors” in Your Budget to Stay on Track
When you create a budget, it is easy to believe that since you are accounting for everything that usually happens, you are covered for everything that will happen. This is rarely true. To avoid confusion, include “false factors” in your budget.
As the personal finance blog Money Crashers explains, basic human nature means you probably can’t (or won’t) have strict control over all expenses. Either you indulge in something you didn’t plan for and throw it all away, or an unexpected bill, for example, for car repairs, will ruin your budget, whether you like it or not. This is why you need to create some wiggle room in your assessments:
Unfortunately, neither nature nor humans are perfect – we exist in a state of constant mistakes and corrections. Failure to meet budget is more likely the result of our misconceptions in creating the budget, rather than failure to meet. Skipping irregular or unusual spending that might occur, or treating budget targets as absolute limits rather than estimates is a surefire formula for failure. In particular, don’t count every dollar of income in your budget – give yourself some leeway for any unforeseen expenses that may arise during the year.
Of course, this does not mean giving up self-control (otherwise what is the point of having a budget?), But it does mean that part of your budget must be inexplicable. Personally, I have a small portion of my monthly budget, labeled “flexible spending,” that is either spent on contingencies or set aside for savings at the end of the month. How you consider this is up to you.
Understanding Why Budgets Don’t Work – 8 Steps to Fix Budget Disruption | Money crashers