A lot of people are willing to live on a budget but unfortunately, some of them are unable to do so. That is because they are unknowingly committing budget mistakes that keep them from being successful in organizing their finances.
Before we can identify what these mistakes are, let us define what budgeting is. Wikipedia defines this financial activity as planning the cash inflow and outflow in a household. This planning will help consumers keep their expenses from going beyond what they can afford. That simply means their income is lower than their expenses. A budget plan has the following elements: net income, fixed, variable and discretionary expenses, and savings.
8 common mistakes in budgeting
Now that you know what a real budget is, you are probably wondering why some people fail to be successful in it. Truth be told, sticking to a budget is hard – but in time, it should get better. If it is not improving for you, then you may be committing one or more of these budget mistakes.
Mistake 1: You do not have a goal in your budget.
Getting used to a budget is not an overnight thing. It will help you control the spending mistakes that got you into debt trouble but that means you have to make sacrifices. If you have a goal, all these sacrifices and changes can be manageable. Your goal will motivate you to strictly stick to your budget.
Mistake 2: You based it on unrealistic figures.
Most people start making a budget because they wanted to get out of debt. That is a goal. However, they want a fast relief and that prompts them to create a really frugal budget that cuts out a lot of expenses. They try to make it work but if the expense budget is not realistic and too small for their needs, they really cannot follow this budget.
Mistake 3: You have no self control.
Another reason why you may feel that your budget is not working is because you simply have no self control. This is a lot more tricky to correct because you are struggling with yourself. It could help to always remember why you are budgeting in the first place. You can enlist the help of family and friends to support you as you adjust in the new lifestyle that budgeting is dictating for you. Sometimes, all we really need is an encouraging word or two. If you cannot develop this self-control, it might even lead to more financial mistakes like too much debt.
Mistake 4: You removed all the fun.
This is a common mistake by everyone. Even in a frugal budget, you do not remove your fun activities. It is better to budget a small amount to satisfy your urges than to completely cut it off and then go crazy in spending when things get too unbearable. When you budget for your fun activities, you can identify the expenses that you can remove to make way for that.
Mistake 5: You failed to prepare for the unexpected.
The miscellaneous part in your budget is there for a reason. There are unexpected expenses that crops up and you may want to make sure that you have prepared for this. In case one month goes by without you using this miscellaneous fund, just put it aside as your savings.
Mistake 6: You are using the wrong system.
Budgeting can admittedly be tedious but fortunately, there are systems that you can use to make it easier to implement. One of the biggest hurdles is tracking your expenses. If you dislike the tedious process, you can use the envelope budgeting system. Finding the right method will keep you from making too much budget mistakes.
Mistake 7: You quit too soon.
Just like getting used to a budget is not an overnight thing, reaching your budget goals will take some time. Fixing your finances, especially when you are in debt is not something that you can rush. Try not to focus on how long you have to go. Just take it one step at a time and you should be able to stick to the budget that you have created.
Mistake 8: You are not revising your budget.
We all change over time and that means our finances and needs do too. All of these changes must be incorporated in your budget. Otherwise, there will be necessary expenses that could be left without funds.
Make a budget that is easy to follow
You want to make sure that you are not committing all these budget mistakes to benefit from having an organized financial life. A budget can help you reach your life goals – but only if you follow it correctly.
To keep you from the budget mistakes above, here are the things that you must do.
Set a budgeting goal before you create a plan.
Take one month to plot your expenses so you can set a realistic amount on your spending budget.
Don’t be afraid to get the help of the people around you. They will give you valuable support as you try to follow your budget.
Budget for your entertainment activities.
Boost your savings to help pay for the unexpected expenses that you could encounter.
Make sure you select the right budgeting system that you can follow.
Try to stick to the budget even when you think that your progress in your financial goals is slow.
Revise your budget as your needs change.
Here is a video that we have created for you to help you create a budget for your household.