Budgets are an amazing tool for getting a clear picture of your financial situation and for planning for the future. They make it possible to see, in one overall place, the exact state of your monthly spending. You know where every dime is going. You know why every dime is going there. You can also see exactly where your financial situation is headed if you stick to that budget.
Sarah and I used a very tight budget during the first few years of our financial turnaround. It provided us with a very specific plan for how we should spend our money, how much we could put towards debt every month, and so on. Along with our debt repayment plan, our budget paved the way to debt freedom.
We still budget, but it’s not as tight as it once was. Mostly, we use it as a guideline and as a way to model our expenses and savings into the future. Of course, budgeting isn’t always that easy. It can be a challenge – particularly at first – and there are many potential pitfalls along the way. Here are nine of the steepest challenges we’ve faced while budgeting and the solutions we use to make sure that they don’t happen again.