Setting up a budget can be a bit of a complicated process when you don’t follow the correct steps. Last time we talked about the proper steps to set up a budget that works best for you and your household. Now, we will examine a few pitfalls you want to avoid. By eliminating these common budget blunders, your budget will give you the financial boost you need.
Not Practicing Your Budget Faithfully
While this principle might seem obvious, it is also one that is sure to sabotage your budget. A few dollars here and a few dollars there which are not budgeted for add up to a great deal of money over time. This is money you should have a designated spot for in your budget that you are neglecting. This will spell trouble in the long term for your budgeting goals. Make a plan for each and every dollar that enters and leaves your home and follow it religiously.
Not Putting Money Aside for Emergencies
It might seem impossible to have income each month that does nothing but sit in the bank, but it is an integral part of any personal budget. If you don’t have it, you are just one job loss or illness away from complete financial ruin.
Most financial experts agree you should attempt to save between three and six months’ worth of living expenses in a savings account to which you have immediate access. For the self-employed or those who work in a high turnover industry, you emergency fund should be closer to a year’s worth of expenses.
Buying on Impulse Instead of Checking the Pulse of Your Budget
Impulse buying is one sure way to destroy any progress you’ve made on your financial goals. Yet, this type of buying can be difficult to cut out until you figure out what impulse buying is and what buying purely based on need is. Instead, make a rule that you will only buy things that are on your list before you enter a store. Or, you will only purchase an item online after you have given yourself 24 hours to think about it and examine your budget .
While impulse buying might seem to only apply to the larger items in your life, the same principle applies to small items like buying a coffee every morning before work or a shopping spree at your favorite mall after a bad day at work. The simple way to stop impulse buying is to never buy anything that is not budgeted for.
Cut Out All Fun Things
If your budget does not allow for anything “fun,” it will almost certainly fail. Why? No one can adhere to something that does not allow for entertainment and fun. That’s why it’s important, both financially and mentally, to have some space in your budget focused purely on your enjoyment. Even if the amount is small, it will go a long way to help maintain your budget.
Pay Only the Minimum on Credit Cards
While completely paying off your credit cards may not be a reality for years to come, gradually paying down your debt is a goal you can achieve each and every month. That will not happen, however, if you only pay the minimum payments on your credit cards. In fact, making only the minimum monthly payments will cost you thousands in interest fees that could otherwise be applied toward savings or something else your family wants or needs.
Budgets are a valuable tool to help you reach your financial goal. There are, however, several obstacles that can completely derail your budget if you are not careful. Be mindful of your budget in all of your purchases and you will be well on your way to budgeting success.
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