Did you try budgeting in time past and didn’t stick with it? Don’t give up too soon on budgeting because you can’t make the budget work. Oftentimes, the difficulties you encounter in your money plan stems from budgeting mistakes and misconceptions.
“It’s never too late to fix your budget, avoid these pitfalls and take control of your finance“
Here are some of the biggest budgeting blunders to avoid, including tips that can help you save some money
1. Not documenting your budget
I have heard this repeatedly, “my budget is in my head”. A budget in your head is not a budget, rather some vague idea of the money spent. For your budget to be functional it needs to be documented, this enables you to review and adjust your budget periodically.
2. Budgeting based on your gross income
Your gross income is the total salary before any taxes and other withholding are deducted from your paycheck. The net pay is the income you receive after all possible deductions have been made. For your budget to be realistic, you need to create your spending plan based on your net pay.
3. Never adjusting your variable expenses
For your budget to work, you have to keep tweaking your spending pattern if need be. Remember, the budget is a plan, by assessing your actual expenditure you can unveil areas you are overspending and adjust.
4. Forgetting about irregular expenses
Those irregular expenses are the tricky piece of the puzzle, when they show up it kind of flushes the money plan down the drain. While you are budgeting for the regular, don’t forget those irregular expenses like annual insurance payment, tax bills etc.
5. Depriving yourself of fun money
Having and sticking to a budget is not about depriving yourself. Ignoring the need for fun and depriving yourself of it can derail your effort in sticking to the budget. Design the budget in such a way that you can still treat yourself without spending a lot.
6. Not tracking your spending
If you don’t track your spending, you risk overspending or spending too little. You need to track what you have spent to know when you have reached your limit also to keep yourself accountable. Find an expense tracking method that works for you, either a spreadsheet, software, or old-fashioned pen and paper.
7. Classifying wants as needs
Another common mistake I have seen young professionals make when preparing their budget is treating nonessential which are “wants” like eating out as “need” which are essential expenditure such as making payments for groceries. Always draw a clear line between your needs and wants.
I hope you found these helpful. Are there budgeting mistakes you have struggled with in the past or still struggling with? We would love to hear from you, feel free to share with us in the comment section. Your feedback means a lot to us.
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pfmAcademy is committed to helping young professionals become intentional about their finance through practical personal financial management tips.
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