You and your family sat down together and took the time to create a household budget. You wanted to control spending and get your finances under control. But after using the budget for a few months, things do not seem to be getting better. Your finances are still out of control and you cannot save any money. Understanding the root causes of poor budgetary management can help you get your budget on the right track.
One of the causes of a bad budgetary management system is that your budget is incomplete. When you create a household budget, you need to take every single home expense into account and try to plan for the unexpected. This includes gas for the car, money deposited into savings for unexpected expenses and setting aside entertainment money each week. When you leave any of these things out -- but still spend the money -- then it becomes impossible for you to manage your budget properly.
Lack of Discipline
A household budget is something that everyone in the family has to agree with and adhere to. If someone decides they can still buy coffee every morning on the way to work or the $25 birthday gift limit is just a suggestion, then money is spent that was not part of the budget. Spending starts to soar out of the range of the allowed expenditures and the budget is unmanageable. Find ways to agree on discipline with spending in order to make the budget work.
Your financial situation changes from month to month. An inability to remain flexible towards those changes is a cause of poor budgetary management. For example, if paying extra to your credit card bills has caused your minimum payments to drop, then you need to adjust your budget to account for where the extra money should go. This applies to months where you know there will be extra bills to pay as well. Not planning for the monthly changes in your financial situation can be costly to your budget.
Using a credit card increases your monthly debt by adding interest income to your monthly payments. Credit cards can also cause budgetary management issues when the interest rates are raised, which subsequently raises your monthly payments. The use of credit becomes a cause of poor budgetary management, and can throw your entire budget plan off. Use cash instead of credit and apply extra money each month to reducing your credit debt.