There’s a reason nobody likes budgeting. Making and sticking to one can feel like sucking all the joy out of your life but if you can’t stick to it, you might end up feeling even more out of control than you were before you created one.
So what do you do? Most people fail at staying on track because they make the common mistakes listed in this article so if you can avoid them, the battle’s half won.
1. Underestimating your expenses.
One of the worst mistakes you can make when establishing a new budget is underestimating how much you actually have to spend each pay cycle. This sets you up for failure from the start but if you’re not careful, it can also lead to a spiral of credit card use and recurring debt.
Instead of falling into this trap, be realistic about how much everything costs and make sure you have enough money set aside to cover necessities. This way, if you slip up, you can generally cover any extras with a quick cash loan rather than having to pull out your plastic. Most cash loans have lower borrowing limits and more favorable repayment terms than credit cards so you’re less likely to dig yourself into a hole you can’t get out of.
2. Not knowing where your money is going.
It’s fairly easy to tell where the cash went in relation to your standard fixed expenses but with variables such as groceries, fuel and lifestyle expenses, it’s a bit easier to lose track. This is the second most common reason why people fail at sticking to their budgets. You don’t have to count pennies but if you’re losing a significant amount of money to unknown places, it’s time to track it down before it becomes a bottomless pit.
3. Assigning every cent.
Having said that, you don’t need to assign all of your income down to the last dime. Obviously basic expenses like rent and food will always need a fair allocation of funds but once you’ve divied up everything you need to survive, make sure there’s enough to live. Deduct your expenses from your income and split what’s left in half, fifty percent goes into savings and the rest is yours to play with. This helps you stay on track because you don’t feel so restricted and can also help boost your savings because you’ll want to find cheaper ways to meet your needs so you have more cash flow to do what you want.
4. Not updating it regularly.
It’s important to have a set budget and stick to it in order to reach and maintain financial independence, but your spending and saving habits should evolve as things change. It wouldn’t make sense, for instance, to work with the same budget on $100k a year as you would on $10k. Likewise, if your rent doubles, you can’t keep spending the same amount on groceries and fun as you were before and still expect to end up with a surplus. Even small changes such as getting a better deal on your gas bill or switching from driving to walking or taking public transport could call for an update to the budget if they affect your spending habits in more than a minimal way.
You may need to make sacrifices to reach your goals but if you stick to the plan, it’ll all be worth it in the end. Avoid making these common mistakes and you’ll be well on the road to having a stable budget that works for your income AND your desired lifestyle.
