Budgeting is a great tool as long as you know how to avoid budgeting mistakes. It is easy to make mistakes if you are just starting with budgeting. That’s why it is important to know what budgeting mistakes are and how to avoid them.
It is important to keep track of your expenses on a daily basis. The whole premise of budgeting depends on your ability to keep track of your expenses and recording those expenses. Don’t become complacent and think of small expenses as unimportant, every little expense matters and needs to be recorded.
With smartphones these days keeping track of expenses should be a breeze. Just take a picture of your receipt as soon as you get it. This way you don’t have to worry about losing a receipt and you can simply pick up your phone and access your receipts.
Budgeting for the Unexpected
Always budget for the unexpected. You never know when you may need to spend on things like car repair or boiler breakdown. Your budget has to include an emergency expense plan. The best course of action when planning for emergencies is to make sure your account always carries a certain amount.
Ignoring your Budget
Building a budget is just a small step, the hard part is tracking your budget. Don’t forget about your budget until the end of the month. Be careful of your spending and refer to your budget on a daily or weekly basis. It better to realise you may overspend before it happens than after the fact. If you only refer to your budget at the end of the month you may realise that you have gone over your budget.
Building an over ambitious budget
Avoid building a budget that is too strict. Most likely your spending will fluctuate from month to month. Build your budget taking in to account these fluctuations in your expenses.
Be realistic with your budget. If you know you won’t be able to deliver on your budget then it defeats the purpose of your budget. A budget should not be a burden on your spending it should be the other way around, it should make your spending decisions easier. Allow some flexibility in your budget to allow you to get a better picture of your spending.
Avoiding these budgeting mistakes will help you stay committed to your budget, commitment is the key to achieving your financial goals.