Budgeting is one of those things that should be very simple. In fact, the whole budgeting process can be executed with nothing more than the computational skills of a fourth grader.

But is it really so in real life?

Despite its obvious importance, budgeting does not sound like a rosy affair to many people. This is because there are many things that go beyond basic mathematics. The important components of budgeting include will, control, discipline and many other traits that you were probably not taught in school.

The budgeting process both formulation and implementation,) will come with the following challenges:

• Lack of Discipline

As mentioned earlier, it is quite easy for anyone to make a budget; in any case, all it requires is the knowledge of the four mathematical operations. However, one of the greatest challenges comes with budgeting is the lack of discipline required to stick to the budget. This means spending money only on the already agreed expenses. It requires a lot of strength to be able to resist impulse buying especially when you are surrounded by so many advertisements fighting for your money.

• Outlining priorities

This is another area where budgeting becomes a nerve wrecking process. If you are preparing a budget and you are part of a family which depends on your financial decisions, other irrational forces will come into play – ego wars, “me too” battles, and many other things that the put to shame the rational economic being of economic textbooks.

You need to be able to know what is important and what is not: should you buy your child that gift he’s always been yearning for or should you put that money in your saving account?

A good planner should be able to able to get his ego out of the way during such times. The best question to ask yourself when you are in a situation where you find it difficult to set your financial priorities is “if I had half the money I have now, what would I have spent it on?”

• Allocating windfall gains

Many of us have heard of those guys who “won a jackpot but are now penniless.” Depending on your income source, there are various degrees to which you can access windfall gains. Even for those of us who don’t expect money from nowhere, there are times when we expect money to be coming from “somewhere” we are not so sure about. Unless you properly plan for this money, it can easily destabilize your normal spending: you will also have many regrets as you will always be asking yourself what you did with so much money. To plan for windfall gains, make sure that that you have a way of storing excess cash such as putting the money in a fixed deposit account, or placing it in the purchase of short term marketable securities and such like things.

Like every gain, there must be some pain. To best enjoy the fruits of proper budgeting, one must be ready to overcome the challenges of the budgeting process. Once the budget has been prepared, the process of sticking to it while at the same time maintaining flexibility to take care of any challenges is what will determine whether your budget is worth the time and money you have spent on it.

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