If you do not have a household budget or have one that isn’t helping you save money, you can be throwing hundreds of dollars away every year. Start with a clean slate by creating or revamping your budget to avoid fees and unnecessary costs. After a few months with a working budget, you will have a better idea of your expenses, and you can adjust it at any point in time. Here are some of the most common mistakes people make when creating or revising a budget:
Forgetting spending areas. You probably remembered to include the electric and cable bills in your budget, but what about the payment for quarterly trash collection? Many people forget to include certain spending areas in their budgets. To create the most comprehensive and accurate budget, add all of your costs and investments, such as college fund payments. This will allow you to cover all of your bases and avoid surprises in the mail.
Foregoing an emergency fund. It is unwise to spend every penny in your bank account, because many costs can catch you off guard. If your car breaks down or you miss a scheduled dentist appointment, you will have unexpected expenses and no cushion in your budget. To avoid overdraft fees and anxiety about unforeseen costs, set aside some money every month for an emergency fund. Since it is built into your budget, it won’t seem like a burden and you will have peace of mind when it comes to your finances.
Under-budgeting. If you do not allocate enough money to each area of the budget, you are destined to spend more than you intended. For instance, you might spend $300 on gas every month but only budget $175. Under-budgeting (and therefore, overspending) for gas leaves less money for other areas of your budget, such as food, clothing, or bills. You are better off over-budgeting and having money to spare at the end of the month than under-budgeting.
Adding potential income. In your budget, you should only account for certain income like your paycheck. Adding possible performance bonuses and other tentative income is a common budgeting mistake. Sometimes pay increases and bonuses do not work out in the end so you should not include them when making a budget. Only account for your regular income. If you have a job with irregular earnings, such as selling candles online, you should make a reasonable estimate of your income. This will allow you to live within your means every month.
These common budgeting mistakes can cost you hundreds of dollars over the course of a year. You should plan well and make a complete budget to start saving money on a regular basis. With a comprehensive budget, you will have more money in your bank account and be able to pay for any unexpected costs. This will create financial stability in your life and make you feel good about how you spend your hard-earned cash. Good luck!
