7 Ways Your Budget Plan Is Being Compromised By Your Expenses

If you are trying to practice smart spending, there is one tool that you will need to have: a budget plan. After the Great Recession, more and more consumers understand the need for budgeting in their financial lives. But that understanding does not necessarily come with application.

Although more people are budgeting, it is not enough to correct the spending habits that have ruined a lot of consumers during the economic collapse. According to the McKinsey Consumer Sentiment Survey, more people are living from paycheck to paycheck compared to 2012 and 2013. Also, more people admit to a decreased ability to make ends meet. The results published on McKinsey.com revealed that more consumers may be optimistic about the country, but that does not mean it is making our financial situation better. For a lot of us, things just seem to be stagnant – not improving but not declining either. This is not a good indication when you think about the improvements in the economy.

One cannot help but wonder – what would it take to improve our financial situation? A budget plan can certainly help.

7 overlooked expenses that can cripple your budget

There are many ways that budgeting can help us improve our finances. In can actually help us with our debt payments. It can also help us understand the limits of our spending so we are kept from overspending. It can even help us fulfill a lot of financial goals. There are several benefits when you implement and follow a budget plan but the thing is, you have to make sure that it is effective.

While your implementation and commitment to follow a budget is the key to its success and effectiveness, you need to understand what can ruin it. One of the things that has a great effect on your budgeting success is your spending.

An article published on Bloomberg.com revealed that Americans belive tht the economy is improving. This may be good news but it is also leading a lot of consumers to spend more than what they think is allowed by their unique financial position. The article mentioned how consumers are now more courageous when it comes to making purchases like new cars, electronic devices and other appliances. While the financial circumstances may be making it more possible to make the purchases, it does not signify that the economic situation in the household is ready to hold these commitments. In fact, there are a couple of expenses that may have escaped your noticed and are actually draining the effectiveness of your well constructed budget plan.

Here are 7 expenses that you should be careful with.

1. Maintenance and repairs. This holds more true for vehicles but it also applies to your home. A busted transmission in your care may not be a huge expense but it could enough to throw your budget plan off balance. A string of car repairs can also force you to use your credit card and thus put you in debt. You have to ensure that your vehicle is well taken cared of and goes through a regular maintenance check to avoid expensive surprises. You need to think about these things and include them in your budget plan to avoid the effects of an expense you are not prepared for.
2. Occasional events. A perfect example of this are weddings. They only happen once and even if you were just invited, it will still cost you to buy a dress or a gift for the event. Not to mention travelling to where the wedding will take place – if it is a destination wedding. Unless you can get the funds from one category in your budget, you may want to just decline going to the event – lest you end up in debt.
3. Extracurricular activities for the family. This includes any sports related activities or training that your child would like to have during the summer. If your child is passionate about a certain sport that requires expensive training, how can you manage paying it all off. It pays to talk to your child so you can plan around these expenses and thus get yourself ready for it. You can include it in your budget plan – specifically in the part where your savings are.
4. Pet expenses. While they are not as expensive are children, they can still rack up costs each month. You need to think about their food, veterinary care and everything that will help them live comfortably with you. Do not ignore their needs because a sudden trip to the vet may lead to a financial problem.
5. Spikes in utility expenses. You may have created a flawless budget plan but have you considered how it needs to change over time? For instance, your budget for heating may not be the same in the summer and winter. Factor in these changes in your budget so you will not fall short anytime during the year.
6. Health expenses. An unexpected medical expense, no matter how expensive are something that you need to prepare for. In fact, a lot of people have fallen into a financial crisis because of an unexpected illness. Do not let this happen to you or any of your family.
7. Unplanned snacks. This is something that most of us are guilty of. This is a small expense – but that is what makes it very dangerous. Since it is a small expense, we rarely put it in our budget plan. And the amount is also the reason why we are not guarded when making these impulsive purchases. If you do it everyday, this small amount will add up. Make sure to know how much you are allowed to spend each day so you will be kept from overspending on your budget.

Make sure that you will not overlook these expenses. A budget plan may be able to help you  get out of debt, but its failure may also keep you from seeing that debt is creeping back into your life.

Here’s an interesting way of managing your money

You have to understand that budgeting is something that some consumers are not enthusiastic about – even if it will lead to their financial independence. That may be caused by its reputation for being a tedious task to do. This may be true – but mostly at the beginning. You have to make sure that the details of your budget are all correct. But even if the bulk of the job is at the beginning, you need to continually check on it as your life changes.

The truth is, budgeting is very important because it helps you practice money management. You may not like the traditional budget plan, there are ways for you to organize your finances.

An article from MoneyNing.com discussed three simple steps that you may want to follow. It is not as tedious but it will make sure that the important goals of a budget plan is covered.

• Automatic transfers. First of all, you want to set up automatic transfer for regular payments that you make. This includes your rent or mortgage, saving goals, retirement, taxes, insurance, etc. Any payment that is consistent in amount and due date can be paid this way. This will allow you to get rid of the details and just concentrate on the total amount that your account has to have each month. You can include all your priority expenses here – even if they are estimated. Just make sure your estimations will always be more than the actual payments. That way, you will not be charged with late payment charges caused by insufficient funds.
• Strict discretionary funds. The second step is to set up an amount that you can use each month. After defining the amount, you can enjoy spending it however you wish. With all the priority expenses taken cared of, you can enjoy this money as you see fit. Of course, when you spend it before the month ends, you have nothing left. That means a bit of control and monitoring is still in order.
• Balance your accounts each month. This type of money management will not give you a tedious monitoring task but you still have to make sure you stuck to your budget. This is why you need to reconcile your account at the end of the month to make sure that your payments are met and you have sufficient funds to meet them.

This is one option that you can do in place of budgeting. What you will prefer to use will depend strictly on your personality of course. Both are effective but you may find that following a budget plan can help you develop the right financial habits and enjoy the benefits of having organized finances. Here is video that will enlighten you about the benefits of following a budget plan.