Whether you are just starting to make money or managing your own finances, or probably just planning to start a budget now or is already maintaining one, the whole budgeting thing is an ongoing learning process. Actually, budgeting isn’t taught at school and there’s no right way how to budget your money. You just learn from trial and error, advices from others and of course, from articles like these. You just need to know and understand what works for you, your income and your lifestyle.
But to help you ensure a smooth cash flow, here are 6 mistakes that you should avoid if you don’t want to wreck your budget.
1. You don’t have a budget.
FYI, a budget is an estimate of income and expenditure for a set period of time that will help you see where your money is going. Without, you are prone to over-spending and therefore, a big pain on your bank account. So yes, you can wreck a budget you don’t have. What you should do now is to sit, write the money that comes in and your expenses every month. From now you on you need to account every penny that comes in and goes out using a budget tool of your choice.
2. Your budget is unrealistic.
If you are doing this then you are just cheating on yourself instead of helping yourself out. Keep it real, don’t set a super low budget for something like food and groceries because chances are, you will overspend. You know your spending habits so set realistic goals.
3. You spend more than you earn.
This is probably a mistake that most people do, especially those who don’t keep track of everything (refer to number 1). Having a budget will really help you have a clear picture of how much money comes in, that way, you’ll also be able to see your spending limits.
4. You don’t account unplanned purchases.
Unplanned expenses are inevitable but that doesn’t mean you should not list that down. You need to account for those purchases so you’ll know how to adjust and work around your monthly budget.
5. You don’t set aside money for emergency situations.
Aside from savings, you should make sure to set a budget for emergency situations such as medical expenses, car repair, job loss, house maintenance, etc.
6. You forget to account interest charges.
If you have credit cards and loans, include an estimate interest each month to ensure that you have enough money set aside to cover these payments every month.