4 Common Budget Mistakes (And How to Avoid Them)
Budgeting is great, as long as you know where your money is really going.
Budgeting doesn't have to be hard. It's a great way to see just how much you have coming in, going out and left over each month. However, there are certain mistakes that many people make, especially in the beginning. These mistakes can mean the difference between a great budget that works perfectly and one that is blown after the first few days.
Are you making these four budget mistakes? If so, you can avoid them in the future!
Trying to Keep Up with Others
It's really common to get competitive with your finances. You see that your best friend can afford that new car or the new house and you want it to. Comparing your finances isn't healthy. You will both be in different positions. She may have a better job or you may have more debt to clear.
Create a budget that is just for your family. It may be hard, but you need to stop comparing yourself with others. You'll just end up overspending and getting into more debt.
Forgetting About the Unexpected
Things happen in life, and they throw your budget off. Your boiler may break or you need to make a repair on the car. Part of your budget needs to be for these emergency situations. If not, you're either going to blow the budget or use those credit cards to get out of a jam, putting you in further debt.
Think about the unexpected things and have a contingency plan. It could be a savings account for emergencies, or you may just make sure your checking account keeps a certain amount as a buffer should something happen. Budget and expect emergencies to happen, and you'll be able to deal with them calmly.
Stop comparing your accounts with everyone else.
Using Outdated Software
You know that software is great for your budgeting. You can quickly track your expenses and make sure you never go over. However, you need to make sure that software is up to date. Outdated software will struggle to link to your different accounts and will not be suitable on the go.
Mint.com is great for budgeting software. You can see all your accounts at a glance, see how close you are to goals and track on the go with the mobile app. It's all free to use too, giving you one less thing to worry about.
Forgetting About the Small Items
You've been tracking those ongoing, large expenses, but you're forgetting about those small ones. It could be the $5 coffee now and then or that $20 on getting your nails done each month. These small purchases soon add up. Just think: $5 per day on your coffee to work is $25 in a five-day working weekend. Say you had two weeks vacation; that's $1,250 each year spent that you're not accounting for.
Track every little expenditure that you make. It doesn't matter how small or infrequent it is, it all adds up and will give you the true idea of the amount you're spending.
Budgeting is great, but you need to watch out for the mistakes. The above are just the four most common people make, and there are plenty more. With planning, good tracking and expecting those emergencies, you will soon find you have more money in the bank and have a budget that is better in shape.