Why Budgeting Doesn’t Work

• Posted by Stephanie
• 01 November 2011
• Blog, Cash Flow, Debt, Financial Behavior

Budgeting doesn’t work. Everyone thinks I’m some kind of budgeting queen but I’m not, and I’m not because they don’t work, not on day-to-day expenses, not in the traditional sense anyway.

Here is how I explain it to a client. When you decide you will renovate your bathroom, budgets work and here’s why: You decide how much you are willing to spend, figure out where you’ll get the money from, make a list, price it out, etc. You may go to multiple stores to source the best products at the best prices and get materials from different places to meet your budget. Now let’s say you get 10% of the way into the reno and discover that there is some rotting wood under your floor and a leaky pipe and it will cost about $700 more than anticipated. You could at that point choose to adjust other components, such as get a lesser grade of tile, consciously decide where to take additional funds from or stretch the completion date so you can carve those funds from another few pay cheques. Either way this is where a budget would really work and you could make decisions as you found out information.

When is the last time you shopped for groceries using the steps above? And this is why budgeting doesn’t work.