7 Mistakes Made When Budgeting
1. Poor Tracking of Monthly Expenses
While most people know how much money they will have income very few actually track their monthly expenses. Let us say you make $3,000 a month but your untracked expenses total $3,500 for the month. Mathematically, you're setting yourself up for failure as there is no way for you to ever catch up or pay off your debt! You would end up in a never ending cycle. Now your next thought might be...I have an income issue...but actually you might have a spending issue. One way to check this is by comparing your monthly planned expenses to your income and taking note of the impact of your unplanned expenses.
Planned Expenses - meaning you wrote it down at the beginning of the month and accounted for it in your budget
Unplanned Expenses - meaning you did not account for this in your monthly budget (i.e., spending $75 in fast food when you only budgeted $20 which leaves you with $55 in unplanned expenses)
2. Overspending and Living Above Ones Means
Allocating to much money or not enough to certain categories when creating your budget. A monthly car note of $500 a month when your income is $2,500 a month is an issue. That $500 is eating into 20% of your income. I know, I know, you like Kalai 20% isn't bad let me live but that 20% is not accounting for gas or car insurance. Let us say gas is $120 a month and car insurance is $150 a month, you are now looking at a transportation costs of $770 a month or 30.8% of your income. Spending 30% of your income on a depreciating asset is a bit expensive. That car might be a bit more than you can actually afford. Try buying a used car with under 30,000 miles on the car.
3. No Emergency Fund
Emergencies are bound to happen! However 23% of Americans, have NO EMERGENCY FUND as stated on Bank Rate! That means that if one of those people lost their jobs they would be in a position to lose their homes, cars, and fall behind on other monthly expenses. This ties into the trend of living paycheck to paycheck. You have to be prepared for the unexpected.
4. Why Can't I Say No?
You have an issue saying no to either yourself or those around you? While I am not saying you need to cut those people off around you but I am saying that you cannot in good conscious move someone else forward if you are stuck in place yourself. In order to help ANYONE, you need to MOVE YOURSELF INTO POSITION.
5. Not Having a Budget
Why do I need to write my budget down? When I have it all in my head?????
Well darling you will more than likely forget (still human) your planned expense and unplanned expenses which means you aren't budgeting but instead guesstomating.
6. I Make to Much Money to Need A Budget
Wrong! Everyone needs a budget no matter the amount of money you make. Actually, having more money makes it easier to overspend and to spend unnecessarily. Every single dollar in your budget need a home. If you do not have a budget, then you have money that is not beneficial to you.
7. Issues with Commitment
Let us say you keep track of all your spending and yet you are still struggling. There is a difference between keeping track and actually implementing. Financial freedom can only be obtained if you are in 1,000%.
You need to be prepared to make sacrifices and to take 10 steps back and only 5 forward. It will be hard but it will be worth it!
Leave a Reply.