Budgeting is the number one requirement for proper financial management. It’s the tool that determines whether you have enough money put away in your rainy-day fund or not. Your budget is the one tool that determines your ability to pay all your bills on time, and whether you’re naturally frugal or you tend to blow your income as soon as money gets in, you must have a budget. Billionaires have budgets, and governments rely on budgets too.
But as you try to stick to that budget, are there budgeting flubs you make? Do you always find yourself going over budget? Well, to make sure that this financial tool works well for you, here’s a look at some of the biggest budgeting blunders you keep making.
1. Extreme rigidity
As you create your budget, you must know that your spending will change across the year. Even when you have identical bills to pay monthly, your spending will fluctuate seasonally. Your winter shopping is certainly different from spring’s or summer’s, and if you have guests, your spending certainly goes up. You could, however, make your budget work by being flexible. Things change all the time, and your budget should be flexible enough to handle any big change.
2. Impulse purchases
Say you’re thinking of employing the services of an eavestrough installation services company for your exterior redesign or repairs, would you just wake up one day and call them in without looking at your finances? Of course, you’d have to plan for that expense, and if it’s urgent, you will dip into your emergency account. What this means is that you must plan your expenses.
Place a tamper on impulse shopping and only buy something when it’s necessary and when it’s been accounted for in your budget.
3. Not having a system
You cannot budget in your head and leave it there. Even writing things down does not work as well as you’d like. Instead of struggling with the unaccounted expenses, employ a budgeting system or an app to keep your finances in order. There are many apps you could try to use. Just identify the approach or app that works for you and then stick with it.
4. Forgetting savings
Your budget should never go beyond your monthly expenses, and it should also have room for savings into your retirement and the emergency fund, as well as any other savings goals you might have.
On the same note, you should not neglect your long-term money goals. So even if it means putting aside $10 monthly to fund a long-term goal, do it. Your future self will thank you, and doing this also motivates you to stick to your budget.
5. Overlooking your semi-annual and quarterly bills
Your spending plan must account for all bills, including the annual, semi-annual, and quarterly bills. Accounting for these bills means that you will not be caught off –guard. You should do this for your medical bills, tax bills, insurance, and vehicle maintenance payments as well.
6. Unwillingness to budge on your fixed expenses
Believing that your car, cable, and rent bills are unalterable is one of the biggest mistakes you will ever make when it comes to budgeting. You can always rent a cheaper apartment, negotiate your cable fees, or trade your car for a cheaper/ older model. Remember that your budget should always have a bit of a wiggle room.
Lastly, a huge budgeting mistake we’re all guilty of involves failing to review our budgets for inaccuracies. Don’t forget regular expenses and don’t miscalculate bills.