3 mistakes that explain why you can’t ever save enough

Chronic undersaving is a common ailment in Canada and many other rich countries — and the condition can be hard to treat.

Even drawing up a budget with ambitiously low expenditure targets isn’t a guarantee of success. In fact, having a spending plan and still failing to save enough is supremely frustrating.

There are usually two main issues with a budget you can’t stick to, according to personal finance pros: it’s not comprehensive, it’s not realistic, or both. And that, really, boils down to three big mistakes:

Your budget doesn’t recognize that stuff comes up — and always will

Being comprehensive means planning for the unexpected.

If you have even a few dollars that slip out of your chequing account every month and are unaccounted for, you’ll end up squirrelling away less than you meant to. Or, worse, you’ll use your credit card to paper over the gap between your financial inflows and outflows.

There are two ways to deal with the unknowable when it comes to budgets, according to Campbell. The first is having an emergency fund.

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This pot of money should ideally be equal to between three and six months worth of your salary, which is the length of time it would likely take an unemployed you to find a job comparable to the one you currently hold.

This is cash you should only use for the big financial curveballs that life will inevitably throw at you. It’s what you dip into if the furnace goes bust, the roof starts to leak or a tree branch falls on your car.

Although you’ll need to be able to access this money quickly, if need be, Campbell suggests maintaining a few degrees of separation between your emergency fund and your day-to-day chequing account. For example, you could store your rainy-day money at a different financial institution.

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Adding a little extra hassle to the process of taking money out of your emergency fund helps tame the temptation to tap it for things that aren’t, actually, expenses, Campbell said.

But there’s also a second, much smaller pile of money you’ll need to incorporate in your budget for non-routine costs. This one is for small expenses, like buying birthday gifts for your kids’ friends, or, say, paying for parking at your doctor’s appointment, Campbell said.

There’s no way to anticipate everything you’re going to spend in a month down to the cent. Instead, you’ll need a little cash buffer to cover that inevitable spending category often labelled “miscellaneous expenses.”

There’s no room for fun

Having a realistic budget means being honest about the limitations of your will power, financial planners say.

The first step is addressing temptation. Budgeting as if you’ll only spend money on necessities isn’t realistic, Campbell warned.

“You’ll last one or two months,” she said.

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Desirae Odjick, the author of millennial-friendly money management website Half Banked, shares that philosophy.

You don’t know what you’re saving for

The other part of making your will power through your budget is making sure that you have incentives to abide by it. And that, Campbell said, means setting concrete saving goals.

That’s not so much about setting a dollar figure as your target as much as envisioning what you’re going to do with the money you’ll be setting aside, she added.

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For example, instead of deciding that you’ll set aside $50 a month for a vacation, pick a destination, plan your trip and cost it out, and give yourself a deadline to reach whatever amount you’re going to need.

It’s much easier to overcome the desire to splurge on, say, a fancy dinner if you can counter the vision of a candle-light, delicious tête-à-tête with the mental image of you lounging on the beach at the Bahamas. Somehow, picturing a dollar figure in your savings account doesn’t quite do the trick.

“The more you want it, the more motivated you are,” Campbell said.