Have you ever spent hours working on your finances and spending plan, only to come up short month after month?
Following a budget isn’t as simple as it seems; if it were, everyone would have one and live within their means. The key to developing a workable spending plan is identifying and eliminating the loopholes that are hindering you.
Here are some minor mistakes that may be destroying your budget:
6 Common Budget Mistakes
1. You don’t list goals
When starting out, it’s extremely difficult to stay on track if you have nothing to look forward to. There’s no logic to conforming to a spending plan without any real objectives. Following a spending plan without working towards any financial goals is the equivalent of taking a slew of college courses without intending to actually graduate. Get out a piece of paper and write down your financial goals — stat.
2. You’re unrealistic
What about the little things that cost a few dollars here or there, but add up quickly? If you assume your budget is iron clad and doesn’t have wiggle room, then expect it to implode before your eyes each month. To prevent this from happening, incorporate money for miscellaneous expenditures.
Also, be realistic with your expense projections. If you spend $100 each week on groceries, don’t expect to suddenly get by on $25 — or you’ll be in for an unpleasant surprise.
3. You’re reactive, not proactive
Do you make a plan before income hits your account, or do you roll with the punches? Waiting until you’re on the brink of an overdraft fee to take action is not the proper way to handle your finances.
Another note: balancing your checking account or using online applications to track your spending won’t cut it either. These are both proactive, and each dollar needs to have a title before it’s deposited, to hedge against the risk of overspending.
4. You feel entitled
You work hard, so you deserve to treat yourself, right? Well, not necessarily. Keeping up with the Joneses because you think you deserve the finer things in life can be a recipe for disaster. Rewarding yourself must be done within reason — or your budget won’t work for you.
5. You allow debt
Guilty of swiping away when funds are running low? This is another huge budget buster. As the minimum payment increases, your budget will feel the pain, forcing you to rob Peter to pay Paul just to make ends meet.
6. You don’t think about emergencies
Do you have an amount set in stone to pay yourself as soon as income hits your account? Or are you like most consumers, paying your bills first and attempting to save whatever’s left over? The latter approach won’t help you reach your savings goals. And any unexpected occurrences, such as a hospital visit, auto repair, or loss of employment, will send your finances on a downward spiral since you won’t have an emergency fund to absorb the costs.
How to Turn Your Budget Around
Struggling with any of these issues? Here are some action steps to help get your budget back on track:
- Establish financial goals
- Track your spending for one month to get a realistic idea of how you should allocate funds in the future
- Compose a realistic spending plan that incorporates your financial goals
- Reward yourself for each successful month and any milestones you reach
What action steps have you taken to make your budget more successful?