Is Your Budget Easy to Beat? You are Probably Budgeting Wrong!


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If you are constantly beating your budget, you need to set more challenging goals.

The Smart Family Finance family budget is getting a tweak. For the last two months our family has managed to come in far under budget. It was a lot of hard work too. We cut deep and had to find a number of ways to make up for it, but now that we’ve adjusted and have changed habits, we don’t find it so hard to meet and come in under budget on all categories. Dare I say, we’ve reached that unacceptable point at which it is easy to meet and beat our budget.

This is why I’m rewarding my family with more painful cuts in our budgeted categories. It’s not that I’m a penny pinching tyrant. I also have no problem conceding that following an easy budget is infinitely preferable to no budget at all. However, if you’ve created an easy budget for yourself, you are not really budgeting, you are merely tracking your income and expenses.

What is Wrong With Easy Budgets

There is an overall misconception about what a budget truly is. For many, a budget is about recording income, expenses and then ensuring that you don’t over-spend the money you make.

This misconception leads to what I like to call “The Straw Man Budget.” A straw man budget occurs when you aren’t really being honest about creating financial goals. Instead, all of your budgeted categories are inflated to ensure that you are never over-budget. The problem is that you’ve set the bar so high that it’s more of a challenge coming in over-budget than under-budget. Instead of creating a serious goals that requires effort to overcome, you’ve set up a straw man so that you can knock it down every time without fail.

These types of budgets are not bad. In fact, for some that struggle with apathy in tracking their finances, it may even be motivational. It’s better than nothing, but it’s just not really the purpose of budgeting.

Why Real Budgets are Challenging

A budget is a plan that tracks and helps you reach financial goals. It isn’t supposed to be a passive record, but an active tool that takes you from your current financial condition to an ideal financial condition.

For example, if you live paycheck to paycheck, but want to put away 10 percent of your paycheck for retirement, you’ve just established a financial goal and need to move your finances from point A to point B. Your next step is to build a budget and a plan to get you to that financial goal. Perhaps you cut back on spending so that you can pay down debt or maybe you just need to cut back on eating out. Your budget is the tool you use to plan and track your money so that you are now able to save 10 percent of your income.

Perhaps you aren’t dealing with such an obvious financial obstacle, but I’m certain you can come up with any number of financial goals. Have you ever wanted to take a trip to Europe? Retire young? Invest in entrepreneurial ventures? These are all aspirations that can lead to goal setting and the best way to achieve these goals is by planning and tracking through a budget.

How to Avoid an Easy Budget

If you consistently come in under budget, there are only two potential explanations. Either you are cheating on your aspirations and goals by hoarding your money instead of spending, or you need to come up with more goals or new goals.

I’ve already discussed cash hoarding, which is when you refuse to spend money in areas and opportunities that you really shouldn’t be passing up. The solution is to accept the fact that a budget is as much about spending what you say you will spend as it is saving what you plan on saving.

The other easy budget symptom is a failure to reassess your goals. As I said, a budget is a tool that moves you from one financial state to another. Once you’ve found that your budget has become easy, it’s safe to say that you are at your new financial condition. Of course, holding your current financial state could be a legitimate goal, but if you were to be honest with yourself, I’m sure there are a number of other lofty goals. For example, you could start a college fund for your children, donate more to charity or set up an inheritance fund for your grandchildren.

When you reach a goal, try and come up with new goals. It might take some practice at first, but there are nearly limitless possibilities.

Budgets Should be Challenging, Not Necessarily Hard

It’s important to draw a distinction between easy, challenging and hard budgets. Easy is where you set the budgeting bar so high it’s more difficult to go over budget than under budget. Moving from one financial state to another financial state will by definition require effort and thus a challenge. However, you don’t have to force yourself to budget so that it is difficult.

Difficult budgets are where you make major life changes and begin eating Mac N’ Cheese four times a week. You use difficult budgets in times of financial necessity like the loss of a job or paying down your debt. The minimal requirement for a challenging budget is movement. So long as you set goals that move you to a new financial ground, you are doing a marvelous job.

It’s not that easy budgets are bad, but they don’t truly qualify as a budget.

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