Debt & Budgeting
You finally committed to making a household budget, listing your monthly expenses and revenue streams. Then, when you looked at your expenses you decided where you could cut back and perhaps save some money. It felt good, right? But then, at the end of the month, you found that you overspent in some of the areas you had hoped to spend less.
Keep Working on it
Don’t get frustrated and don’t give up. You can still fix it. Maybe you just need to make some adjustments. It’s also good to be aware of the most common reasons household budgets do fail. Here are the five most common mistakes people make when crafting a budget.
- They are unrealistic: When we sit down to make a budget, we too often do so with unrealistic hopes. We plan to spend just $50 a month on eating out, or we promise that we’ll only spend $400 a month at the grocery store. Then, at the end of the month, we discover that we spent $100 on pizza alone. At the grocery store, we ended up spending $700. What’s the best way to avoid this mistake? Be realistic about your spending habits. If you like nothing more than catching a first-run movie on the weekend, don’t pretend that you’ll go through the entire month spending just $25 at the theater.
- They don’t plan for emergencies: Things go wrong, every month. Maybe your washing machine goes on the fritz. Maybe your dishwasher springs a leak. Maybe your dog needs an emergency visit to the vet. These emergencies require money, usually enough to break your monthly budget if you don’t plan for them. Make sure you budget each month for emergencies. If you don’t need to spend that money? Great. However, you can bet that the following month, something will come up.
- They forget birthdays, anniversaries, and Valentine’s Day: Special occasions happen more than we think. Each month, it seems, something comes up. There’s a birthday, holiday, or anniversary. Buying presents and cards can eat into your monthly budget. Make sure you include a line item in your budget for these special events.
- They give up too soon: Failure is not fun. When you reach the end of the month and find that you’ve overspent again, it’s too easy to give up on the budgeting process. Don’t do this. Try again next month. Think of it this way: Yes, you overspent last month. However, if you didn’t have a budget in place, how much more would you have spent?
- They reward themselves too much: You work hard, why not splurge when you receive an extra-large commission check or an unexpected bonus. There is nothing wrong with that but be careful. Don’t spend all that money on entertainment, gifts, or high-end electronics. Once you’ve gone down that path, it’s just too easy to keep doing it. After all, you purchased that iPad with your bonus money. It sure would be nice to have that keyboard attachment to go with it. That purchase, though, might put you over the amount of your bonus. It could very well scuttle your monthly budget.
You committed to a budget, and it will help you save money. Don’t get upset if you have some failures along the way. Be realistic, plan for emergencies, and make adjustments.
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