There is no getting around it: trying to save money is tough. Whether you are single or have a family, gaining control of your money and setting realistic financial goals for your future is necessary. Numerous budgeting techniques can help you, but regardless of the method, it’s important to know there are advantages and disadvantages to budgeting.
Many people find a budget restrictive, time-consuming, or difficult to maintain. Yet, a budget helps you reach your goals, whether it’s to be debt-free or financially secure.
Like with many things in life, it is good to consider the good and the bad so that you enter budgeting with open eyes and set yourself up for success.
Disadvantages of Budgeting
Sometimes starting with the bad news is best. The following disadvantages are nothing that cannot be overcome. You’ll need to tackle them to make the most of your budgeting venture.
1. It Can Be Tough to Find the “Right” Method
Not every method is ideal for every person. You will have to spend time researching each process and choosing the method you think will work best.
For example, the 60-30-10 budgeting rule is typically only feasible if you’re a very high earner, or have very low expenses. A family on a moderate income in a high cost of living area would likely not be able to utilize that breakdown.
That doesn’t mean they can’t budget; it simply means they need to find the right fit for them.
The truth is that no matter how well you research, you might still get it wrong the first time. It takes some trial and error. So, try multiple budgeting methods to determine which is better suited.
(My personal preference is values-based budgeting. There are less up front rules and it takes more planning to get started, but it can be adjusted and individualized for you and your family).
2. Budgeting Takes Time And Effort
If it is the first time you are budgeting, it can take time and effort to set up. It’s not always fun, especially if you’re trying to work your way out of debt.
Firstly, you must sort through and calculate your income and expenses and consider your financial goals. Use at least your last 3-6 months of statements to calculate your expenses, and try to break these into categories (i.e. groceries, eating out, entertainment, etc).
You must then decide on a budgeting technique, and outline your spending limits (or spending goals, if we want a more positive term!) for each category. Be sure to also include money going towards debt payoff and/or savings if those are priorities for you.
Next, figure out how you are going to track it. This could mean setting up a template on your computer, using a mobile phone app, or simply keeping track of expenses with pen and paper.
It seems like a lot up front. But once you get in the habit of budgeting, though, maintaining it throughout the month is relatively quick and easy.
3. Your Budget Might Initially Be Unsuccessful
As mentioned before, you might find a particular budgeting method unsuitable, leaving you disappointed when it doesn’t work initially. Even if a plan is right for you, failure can come in the form of overspending or losing track of your monthly expenses.
These challenges are expected and should not discourage sticking to your budget. Instead, look at the obstacle as a learning opportunity to do better in the future.
For example – did you spend more than desired because you had a car repair? Perhaps that’s a sign that you need to build in a sinking fund (a savings category) for car maintenance and repairs, because we all know those issues are bound to pop up at some point.
Or did you blow extra money on takeout this month because you didn’t feel like cooking at the end of a long day? Maybe it’s time to let go of the dreams of fancy home-cooked meals every night, and purchase inexpensive frozen meals that can get you through those days while still keeping your budget in check.
4. Budgeting Requires You To Change
Generally, most people resist change. In this case, budgeting becomes much more difficult because it forces you to change your lifestyle.
Changes can be relatively small, like skipping your monthly massage or starting to cook at home rather than eating out. More drastic changes might include selling your car and using public transport or downsizing by moving to a smaller, more affordable home.
These changes are often uncomfortable, yet some level of change will be necessary if you want to achieve your financial goals.
5. A Budget Is Not A Miracle Cure
As effective as budgeting techniques are, they are not in themselves a solution to your financial problems. It is a vehicle to get you where you need to be.
Suppose you persistently overspend, even after trialing multiple budgets. In that case, you will need to be honest about where the problem lies. A budget is a guideline, but it cannot change human habits nor play police to curb frivolity.
Consider other ways to help you stick with better habits – whether that’s therapy to deal with overspending, an accountability buddy to meet with each month and chat about budgeting, or a habit tracker to note the days you managed to not spend.
6. Budgeting Can Cause Some Stress
A budget can be a double-edged sword. On the one hand, a budget can relieve you from financial stress since you know exactly how much you can afford to spend. Yet, a budget regulates spending, which can elicit some stress itself.
For example, you might overthink every product choice while buying groceries, or become anxious when your family keeps popping the heat up, spiking your gas bill.
Or what if an emergency suddenly requires you to be flexible with your budget or forces you to overspend? That could certainly cause stress.
Aim to be patient and allow yourself some room to be human – nobody always gets it right, and life constantly throws us curveballs.
Advantages Of Budgeting
Being aware of the disadvantages of a budget helps you to overcome them. Ultimately, budgeting has a lot more benefits that outweigh the negatives, making it an activity that is well worth trying.
1. Getting Control Of Your Spending
Setting up a budget allows you to better manage your money and reach financial goals. Your aims might include the following:
- Getting control of your spending.
- Saving up for retirement.
- Being able to pay off your debt.
Whatever your financial goals, a budget can be tailored to your specific needs. It can serve as a compass to help you get complete control of your money.
2. A Budget Shows Your Spending Habits
A budget can sometimes feel like someone holding a mirror up in front of you – forcing you to see what you might not want to see. You will see where your money is going if you track every monthly expense.
While it’s not always a pretty picture at first, once you understand your financial habits, you are able to actually make positive changes. It’s very hard to take action when you don’t fully understand the problems, and budgeting allows you to see them clearly.
For example, you might be surprised by the high cost of your gym membership, or that you somehow have five streaming subscriptions. Instead, you could opt to take up walking, running, or home workouts, and you could limit yourself to the two streaming subscriptions with the biggest variety.
3. Budgeting Gets Everyone On The Same Page
The topic of money can often cause tension between loved ones. This is where a budget is valuable: it’s a method that acts as the intermediary between people and guides what you spend your money on.
Setting up a budget gets you talking about money with your family, which is a critical step. After that, once you establish a reasonable budget for your household, it goes without saying that everyone will be forced to try and stick to it. It, therefore, places you all on the same page regarding your financial goals.
4. A Budget Helps You To Prepare For Emergencies
Many people live in denial about the necessity of saving money, whether for home repairs, job losses, or long-term retirement.
It is, naturally, much easier to assume that nothing unexpected or tragic will ever happen to you or those close to you. The reality is that emergencies can and will occur.
Emergencies are typically factored into effective budget methods, forcing you to put money aside for it each month. Initially, this might seem difficult because you are not getting anything ‘tangible’ back for it.
But rest assured, you will be more than thankful for these savings when your car breaks down, or when the toilet leaks through from your second floor to your main floor. (Yes, both of these happened to me within a two month time frame last year).
5. A Budget Has Intentions
If you are known to spend your money without much thought, a budget forces you to make more deliberate choices. It makes you think twice when tempted to make impulse purchases or spend money when cheaper alternatives exist.
A budget is not always about living frugally or denying yourself life’s pleasures. Still, it does make you act more responsibly and get you to think of the long-term gains rather than giving in to immediate satisfaction.
6. Budgeting Helps You Meet Financial Goals
A budget might feel rigid and restrictive, but it is there to help you meet your goals. That might be, for example, financial freedom at 45 or paying off your mortgage within five years.
Very few people are disciplined or organized enough to make these goals happen, but if you create a good (and realistic) budget, and actually follow it – you’ll find yourself achieving the unbelievable goals you set.
The Bottom Line
There are many pros and cons to budgeting that you need to consider, especially if it’s your first attempt at keeping one. Yet, the advantages far outweigh the disadvantages. Once you figure out which budgeting technique is best for you, you will see the value of your efforts in no time.