If you’re constantly worrying about where all your money is going, you never seem to have enough of that wonderful green stuff or you just don’t seem to be able to put any into savings, it’s probably time that you put together a budget and started using it. More than likely you have heard about budgets and budgeting before but might not have done anything about setting one up because you thought it would be too difficult.
Frankly, setting up a simple budget is well within the abilities of the average person (and we certainly have written enough blog articles about how to do it) so if you’re keen on setting up your very first budget go back and take a look at some of the excellent articles we’ve written that will show you how. Today’s blog article is about avoiding common mistakes that people make either when making or when using their budget. So, if you’re keen on avoiding these common mistakes please keep reading and will show you how. Enjoy.
Many people make the mistake of setting budget limits that are much too rigid. For most people their expenses will fluctuate from month to month and, if their budget is too strict, they will end up overspending and nothing will go into savings (not good). For example, a budget that doesn’t give you the flexibility to spend a little extra during the holidays, for birthdays or for vacations will make it nearly impossible for most people to maintain an accurate perspective on their finances and make it much more difficult to save. Also, many people do not fund an emergency account adequately and, when an emergency pops up (as they tend to do) they end up having to raid their savings to pay for it.
Another common mistake that people make is to not include an amount for saving into their budget. Smart savers will always include a certain amount, either weekly or monthly, as an ‘expense‘ in their budget so that they can accurately figure out what they’ll need as far as spending and what they need as far as savings. One of the best ways to do this is to have a specific amount automatically taken out of your paycheck and deposited into savings before you even get paid. That way the money never needs to pass through your hands and the likelihood of spending it is considerably less.
Waiting until the end of the month to log their expenditures and review their spending habits is a mistake that many people make with their budgets. Simply put, tracking your spending is one of the most essential factors to making sure you stick to your budget. Making decisions about your spending is much more difficult if you don’t have a good idea of exactly what is going on with your money (or at least have a good idea). That’s not to say that you need to spend hours a day poring over your spending habits and tracking every last penny but, in most cases, a weekly check of what’s coming in and what’s going out is a good idea. Logging your receipts every day is a good idea however and will help you to stay on budget and not spend more than you had planned.
Unless you have a separate account or you prepay for regular expenses, your budget may not be accurate. What we are referring to hear are bills like property taxes, car insurance and other regular monthly expenses that you must know in order to be able to incorporate them into your budget and will accurately determine what you’re going to need. If you know how much money that will be going out for these expenses every month (and you really need to know) you will have a much better idea of do what it takes, dollar-wise, to maintain your particular lifestyle.
Lastly, many people make the mistake of setting up a budget that is overly complicated. Unless you are going to have a professional set up your budget and take care of it for you, you can do away with elaborate systems or special tools and use a simple budget plan. And simply put, the more complicated you make your budget the more likely you will be to avoid it and end up right back where you started; not using a budget, spending too much money and saving too little. If you have access to a computer (and these days, who doesn’t?) consider purchasing Microsoft Excel or a similar program and creating a basic spreadsheet for your budget. If you’ve never used a spreadsheet program there are plenty of tutorials online that will show you how. Once your simple budget is set up you will be able to easily keep track of your monthly expenses, keep your spending in check and avoid the tediousness of budgeting that turns most people off and keeps them perpetually living from paycheck to paycheck.
And as we mentioned earlier, we have written several articles on how to set up your first budget so, if you have a moment and have never done it, take some time and find one of these articles to get started. We promise that it will be well worth the effort and, once your budget is set up, the amount you will be able to save will increase substantially as well as your sense of well-being.