If you’ve previously tried to make a budget, but ultimately failed to stick with it, it may be because you’ve been making some common budgeting mistakes. Perhaps the idea of a budget then seemed daunting because it ultimately didn’t align with your spending habits. Budgeting your money is an important part of managing your personal finances. A budget can give you a snapshot of where your money goes and put your financial goals into perspective. Be sure you’re not falling for these 5 common budgeting mistakes when creating your budget.
1. Not writing your budget down
It helps to keep track of your budget when it’s physically written down. There are also many apps available that allow you to visualize your budget. By not writing down your budget, it may be easier to overspend in certain categories. Keep your written budget in a place where you can see it such as on a desk, the refrigerator, or planner. This will help you to see your goals and actively think about the categories in your budget.
2. Not tracking your spending
It’s important to know where your money is going each month. Tracking your spending allows you to direct your money where to go and can show where you prioritize spending. If you’re not tracking your spending, it’s difficult to know where to adjust your budget. Perhaps one area is being overspent each month whereas another area has a deficit. By tracking your spending, you can adjust categories depending on your individual needs.
3. Setting unrealistic goals
Setting financial goals that are too high can cause you to get discouraged when your budget isn’t working. If you have a financial goal of saving a certain dollar amount by a certain time, try to plan out how many times you can contribute to that fund, versus taking all the money from one paycheck, and thus depleting your funds from other necessary expenditures.
4. Not accounting for one-time, or rare, expenses
Many people set their budgets according to monthly bills and expenses, but often forget to budget for one-time or rare expenses. These one-off expenses can include birthday or anniversary presents, haircuts, back-to-school shopping, car maintenance, and more. Similarly, when first setting up a budget, it’s often easy to exclude “fun” items, such as getting a pedicure. Incorporating necessary fun expenditures is a good way to keep your momentum that aligns with your financial goals. Budgeting for rare or fun expenses is a realistic approach to better managing your money.
5. Getting discouraged and giving up
A budget doesn’t have to be restricting, rather it’s tailored to you! It’s important not to get discouraged if your budget isn’t working – it simply means you need to adjust. Account for every dollar by giving it a place (or category) to go to and adjust month-to-month when needed. It’s normal for a budget to fluctuate until you better understand your spending habits.
If you need more direction for your financial goals, including saving, investing, or consolidating monthly bills, contact an Eastex Credit Union representative today!