Avoid These Budgeting Mistakes
Budgeting can be overwhelming when you’re just getting started. Sometimes, people also make certain statements regarding why they can’t budget, “I don’t make enough”, “Budgeting is for broke people”, “I want to spend my money however I want to”. However, many individuals may not realize that budgeting provides you with financial clarity.
To avoid some of the frustration that may come with budgeting, here are four (4) budgeting mistakes you can avoid:
1. Creating A List of Bills: As always, I remind individuals that a list of bills alone is not a budget, since you also spend money on additional things throughout the month, you must include those expenses as well when you are trying to calculate total monthly expenses. Bills are typically considered as fixed expenses, but calculating your variable expenses provides an even deeper look into your finances. Variable expenses can be things such as: Gas, Groceries, Entertainment, Restaurants and more. It is important to not make this budgeting mistake by excluding variable expenses when creating a budget. If you do miss this critical step, you will have an incomplete and inefficient budget from the start.
2. Over Saving: This is a concept many individuals can easily mess up. This isn’t saying to not save money, but it is imperative to work on your budget to clearly understand exactly how much you can afford to set aside each week, every two weeks or each month towards savings. The mistake with over saving is when you’re not clear on how much much it truly takes, to cover all of your monthly expenses and you transfer too much money into your savings. This creates a cycle of continuously withdrawing money from your savings to cover expenses. It is important to properly analyze your budget monthly, including your savings target to ensure you are meeting your monthly needs and hitting your savings goals!
3. No Miscellaneous Category: Having a miscellaneous category is important for two reasons: You can catch expenses that you simply forgot to budget for, which definitely can happen because you’re human. In addition, you can identify budget categories that you may need to create, if they are repetitive expenses that you constantly have each month that go into the miscellaneous category. For example: If you find yourself consistently entering household related expenses such as toilet paper, paper towels, dishwashing liquid, detergent etc into your miscellaneous category, you may want to consider creating a “Household” budget line item to properly account for these recurring expenses. It definitely provides some additional insight into your spending habits.
4. Lack of Personal Spending: You are going to spend money during the month for things for yourself! It’s inevitable. So why not proactively create a line item in your budget to account for these expenses? It is important for you to know that creating a budget does not mean you will no longer be able to purchase things for yourself. In fact, it will help you to truly assess what is important to you and help you with accounting for personal spending within your monthly budget.
Avoiding these budgeting mistakes can help you master your money management and budgeting skills to achieve your financial goals!
