What’s the first thing that you think about when you hear “create a budget and stick to it?” For many people, the first thing that comes to their mind is “restrictive”. They think that having a budget means they can’t spend money and they can’t have fun. Their thoughts convince them that budgeting is a bad thing.

Instead of seeing a budget as being “restrictive” – see it as a chance to use your money wisely. It means choosing to spend your money on the things and activities that are important to you. It means not feeling guilty about how you are spending your money – because you’ve already allocated an amount to be spent on that particular item/category. When you have a money plan in place, then reaching your financial goals becomes achievable.

“Over time, and through healthy money habits, I learned that a budget doesn’t limit my freedom—it gives me freedom.” – Rachel Cruze

The best way to overcome budgeting challenges is to identify potential challenges – before you encounter them in life. This allows you to deal with the challenges, before they become a problem. Here are the top 10 personal budgeting challenges that you need to be aware of and have an action plan in place.


#1: Not Setting Financial Goals

People are more motivated when they have a clear goal they are striving to accomplish – whether it’s a personal, work or financial goal. Financial goals include both short-term and long-term goals. Once these goals are set, then they will serve as a guide on where your money will be spent.

Here are a few examples of financial goals:

* Setting aside money to have fun experiences (i.e.: vacations, concerts, etc.),

* Building up your emergency fund,

* Paying off debt,

* Saving for a down payment on a house, and

* Saving for retirement.


ACTION STEP #1: Sit down and make a list of your financial goals. Make each goal clear by including the amount needed, a due date of when the goal will be reached and steps you are taking to reach that goal.


ACTION STEP #2: Set your finances on auto-pilot. Automate bill payments and transfers to your savings account. This will ensure that no bills are missed and that you’re making progress towards your financial goals.


#2: Creating a Budget and then Ignoring It

The most important part of a budget? Nope, it’s not setting it up – it’s sticking to your budget. It’s important to compare your actual spending to what you have budgeted. Then, if you start to go over your spending allowance, you can take action. It could mean allocating more to one particular category and less to another category. It could also mean setting up systems that make it easier to stick to your budget.

I once had a friend comment that she stopped following her budget because she wasn’t seeing any progress. The problem wasn’t her budget – it was that she wasn’t changing her spending habits. The lesson here is that if you want to see progress or change, then you can’t always keep doing the same things over and over again. Take the time to analyze your money to see what works and what doesn’t work.


ACTION STEP: Set aside some time each month to compare your actual spending to your budget. If it’s not aligned, try to figure out why. Is your budget too unrealistic? Do you need to replace bad habits with good habits? Sometimes it’s a matter of adjusting your lifestyle, so that you don’t feel deprived or have to rely solely on will power in order to stick to your budget.


#3: Fear of Facing Your Debt

If you don’t know where you stand, you can’t fix the problem. Even if you do take steps to fix the problem, how will you know if they are actually working? It’s important to face your debt. Look at your statements and write down your balances and interest rates.

Keep reminding yourself to be gentle. Past mistakes do not need to be repeated. Instead, treat them as a learning lesson. Sometimes, you learn better when you do make a mistake. The key is to learn! Take some time to understand what behaviours and mindsets lead you to get into debt in the first place. Then, come up with a plan to correct those behaviours and mindsets going forward.

Finally, remember to be kind to yourself if you find yourself back in debt in the future. It takes time to change behaviour patterns that were learned over a lifetime. Take a deep breath and try again. Repeat as necessary.


ACTION STEP: Create a debt repayment plan. Prioritize your debt based on the balances with the highest interest rates (called the debt avalanche plan). Pay these balances off first, while paying the minimum balance on all of your other debt. Put these payments, and extra payments, in your budget.


#4: Not Making Saving a Priority

“Do not save what is left after spending, but spend what is left after saving.” – Warren Buffet

You will never be able to save if it comes last. That’s the beauty of budgeting – you can see how your income can cover your expenses, savings and even give you some “FUN” money! Even if you can only save a small amount of money each month, over time it really does add up!

Make saving a habit – no matter what your income level is. It’s too easy to blame your current income level for why you don’t save. However, too many people fall in the trap of “lifestyle creep” – that is, whenever they receive more money, they spend more money. But when saving is a part of your lifestyle, it becomes second nature – no matter how much you earn.


ACTION STEP: Constantly look for ways to either reduce spending or bring in more money. Here are three areas to examine:

1) Regularly examine your expenses and see if there are places you can reduce spending.

2) Start a side hustle or ask for a raise in order to make more money.

3) Consider selling stuff that you no longer need or use.


#5: Not Planning for the Unexpected

In life, things happen. You could lose your job, be in a car accident or have unexpected house repairs. If any of those things happened to you, would you have the money to deal with it? I don’t mean the ability to pay for the expenses with a loan or with your credit card or with some investments (that may or may not be locked in).

I’m talking about having some money in your bank account – where it’s easy to access when you need it. This account is called an emergency fund. It should have enough money in it to cover 3-6 months of essential expenses. As the name implies, it is only used in an emergency – an event that you can’t predict.


ACTION STEP: Set up an emergency fund to cover your essential expenses or even unexpected expenses. Keep this money in a separate account, so that you’re not tempted to use it for something else.


#6: Forgetting About Events and Seasonal Expenses

In budgeting challenge tip #5, I talked about saving for unexpected events. But this budgeting tip is all about those events and seasonal expenses that don’t occur every month. They could happen every few months or even just once a year. Because of their infrequency, it’s easy to forget about these types of expenses.

Examples of events and seasonal expenses are:

* Birthday and Christmas gifts,

* Property taxes / Income taxes,

* Vet bills,

* Annual licenses or membership fees,

* Winter and summer car tire changes,

* New summer and winter clothes – especially as kids outgrow their clothes, and/or

* Back to school supplies.


ACTION STEP: Track your spending. Sometimes it’s not that the expenses are unexpected, but it’s that you forget about them because they only happen once or twice a year. By tracking your spending, you can identify these occasional expenses. Then, set aside an amount each month, so that when the bill comes in, you will already have saved the money to pay for the bill.


#7: Making Your Budget Too Restrictive

In can be tempting to cut out as much spending as possible, in order to meet your financial goals quickly. But when your budget is too restrictive, you will feel deprived. Once you start feeling deprived, you will soon loose the desire to stick to your budget. In a worse case scenario, you give up completely on reaching any financial goals and your financial situation will become exponentially worse.

Instead of making your budget too restrictive, it’s better to ensure that your budget is aligned to your priorities and values. When creating your budget and setting financial goals, you also need to list your priorities and values. For my family, being physically active is a high priority. For us, this has meant choosing a smaller house that is close to several nature trails. We would rather have less indoor space because it means we are able to get out for more walks in our neighbourhood – without always having to drive to these trails.


ACTION STEP: Create a list of your priorities and values. What’s important to you? What activities do you really enjoy? Then, create a lifestyle that you enjoy AND that is aligned to your budget and financial goals.


#8: Giving in to Impulse Shopping

Small amounts really do add up. Just track your spending, especially during holiday seasons, and you’ll quickly see what I mean. Now, there are times when you do need to buy these items. But are they always necessary? Buying unnecessary items, or spending more than the amount budgeted for a particular category, is often cause from impulse shopping.

Impulse shopping can be defined as spending money on something when you weren’t intending to buy that item. It can be a struggle to keep this impulse shopping under control. Why? Here are three main reasons people like to shop:

1) They’re buying something just because it is on sale,

2) They’re indulging in retail therapy (even though it’s only a temporary fix),

3) They were never taught how to manage money in a good way.

If impulse shopping is a struggle for you, there are a few steps you can take to keep it under control. If your bad habits ever try to take over, just go back to the steps outlined below.


ACTION STEP #1: Identify your triggers. When you know why you are behaving the way you do, then you can set up systems to help you avoid those behaviours.


ACTION STEP #2: Minimize going to the places where you engage in impulse shopping. This may mean that you limit your trips to the mall or not storing your credit card information on online shopping websites. Even putting in one extra step can reduce how much you buy or give you time to reconsider your purchase.


ACTION STEP #3: Give yourself a budget for impulse shopping. That way, you can spend your money on whatever you want – completely guilt free – as long as you stay below your limit.


#9: Fear of Disappointing People

Have you ever spent money on something – not because YOU wanted to or had planned to – but because you felt obligated? Perhaps it’s the long-held family tradition of buying expensive Christmas gifts for each family member or holding elaborate birthday parties because that’s what everyone else does.

It can be scary to try to stop the gift giving or to go against socially accepted standards. People often keep going along with what everyone else wants because they’re afraid of disappointing others.


ACTION STEP #1: Be honest with other people. Let them know that you are choosing to prioritize your financial goals. Don’t feel like you have to give more details than you are ready to share. Keep it simple and proceed to step two.


ACTION STEP #2: Offer alternatives. It can hard to accept change, especially when there’s not a clear alternative. Come up with a few ideas of what you can do instead – ideas that emphasize spending time together or other ways to have fun. Be open to suggestions and working towards an acceptable solution for everyone.


#10: Eating Out Too Much

Cooking (and cleaning up afterwards) takes time. Often, it’s time you don’t have, especially after a busy day of work. To save time, most people turn to eating out – whether it’s in a restaurant, delivery or take out. It’s convenient, especially in this modern, busy world.

However, eating out will always be more expensive than cooking your own food. That’s money that you could put towards reaching your financial goals – like paying off debt or building up your savings investments. So, if you’re looking to reduce spending, make sure you tackle this budgeting challenge head on!


ACTION STEP #1: Create a meal plan for the week. Plan for prep and clean up. If you know you are going to be busy on a certain day or week, then one solution is to plan to cook one-pot meals.


ACTION STEP #2: Have a budget for eating out – even if it is only once a month. It’s more fun to eat out when it’s a treat!


As with any challenge in life, it’s good to see what works, what doesn’t and come up with a plan that is easy to follow.


You’ll also like:

Emergency Fund: How Much Do I Need to Save?

9 Common Limiting Money Beliefs (And How to Transform Each One)

5 Essential Steps to Measure Your Financial Health


Until my next blog post, here’s wishing you lots of joy and happiness!
With love,


Hi! I'm Joanne. I’m a Canadian Chartered Professional Accountant (CPA, CMA). Money management is a life skill that I passionately believe all people need to learn. As an accountant, I love helping people understand numbers and money. At BuildingJoyAndHappiness, I share my tips to money management and make understanding finances simple.

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