5 Common Budget Mistakes
A budget is the key to managing your personal finances efficiently. Without one you could end up in financial ruin. As a result, it’s always good to have a plan when it comes to spending, it will save you time and more importantly money.
1. Not Being Honest About Your Budget
Most people think they know how much they spend and therefore forget to write every single expense down in their budget. However, this is a common and often catastrophic mistake. Not keeping track of every expense could lead to serious consequences like debt or financial ruin.
When making a budget, you must be honest with yourself and write all of your expenses down, no matter how small. Remember to add any expenditure that you make regularly, including entertainment and shopping. This is going to help you not hinder you, when you go to make your final budget.
This will also make you aware of your actual spending habits, which will improve as you start realizing how to make better money spending decisions.
2. Giving Yourself A Break
You give yourself a break on your budget one time and think nothing of it, then another, then another and before you realize it you are constantly maxing out your funds instead of saving.
A budget should be strictly followed for optimal results, the more chances you give yourself, the worse you will become at managing your money. You have to be dedicated and committed to improving your personal finances in order to be a person with good spending habits.
Instead of cutting yourself a break when you max out your budget, stop spending completely. You will have to go cold turkey except for bills and emergencies. This will control your spending habits and keep the damage to your funds low.
3. Not Counting Every Dollar
When you make a budget, it should be an accurate representation of your spending habits. If it isn’t then it could make you think that you have more money than your think and therefore you might fall into debt.
When you have a budget it’s important to track every expenditure, down to the cents. Rounding isn’t a good idea because it can inflate your spending and it’s not very accurate and accuracy is key when trying to save money and reduce your debts.
The best way to make sure your spending amounts are accurately tracked is to right them down as soon as you spend the money. For instance, when you go to the grocery store and spend $10.11 on a few products, write it down. A good tip is to write down what you spent the money on too, so that you can remember when you go to tally up all your funds at the end of the week.
4. Not Including Your Bills
Your bills are the most important part of a budget and not including them is a very bad idea. They make up the majority of your budget and as a result must always be taken into account. Bills should include your utilities, house and car payments, loans, etc.
Bills are first priority in a budget and must be accounted at the very beginning. Once you have them all allotted, then you can start to add extra expenditures. Be sure to make sure these are accurate and up-to-date; you don’t want to miss a payment or making the wrong payment.
Many people forget to include their bills into their budget because they pay them so regularly but that’s the problem. Your budget is a measure of all of your spending for the month and should reflect each expenditure.
5. Not Planning Ahead
When making a budget, do it for the month, that way you don’t have to constantly be devising a financial plan for each week. This will also make it easier when to track your spending as the month progresses without feeling like you forgot to account for funds.
If you feel like a month is too much planning, try two weeks but one week is too little time. You will be more prone to just spending on a whim and be less motivated to stay focused. A plan will keep your spending down and stop you from making bad spending decisions.
Your budget doesn’t have to be extremely detailed, just enough so that you know what are the important payments for the month, what debts you have and how much you can afford to save.
A Budget Is Key
A budget is a powerful tool and the key to any savvy financial planner success. If you want to reduce your debts and save money, this is the best way to do it. Think of a budget as a way to optimize your spending while still being able to save. Also a budget lowers your stress when it comes to paying bills and having money for emergency situations.