Household Budget Mistakes To Avoid
Having a household budget is essential if you want to save money or pay off debt. It is important to know where your money is going each and every month! When creating your budget, there are a few specific things you will want to look out for – and avoid – to keep that money in your bank account. These are five critical mistakes that you will want to avoid when creating your household budget.
Trying to “Keep up with the Joneses”
It is always nice to own cars or houses similar to your neighbors and friends, but it can also cause a huge strain on your budget. Not everyone is going to have the same income and if you find that you make less money than your friends (or your perception is that you do), trying to maintain the same lifestyle that they do can be detrimental to your budget. While you may have more items and/or appear to be in the same financial bracket as those around you, you are only going to be incurring more debt. Make sure that you create your budget based on your personal limitations rather than competing with anyone else.
Not Accounting for the Everyday Expenses
While it may seem like a small expense to spend $3 for a coffee every day, the tiny purchases do add up quickly. Paying $3 per day is $27 per week and about $93 per month. If you are not figuring things like this into your household budget, you may be hurting before you ever reach your next payday. Make sure that you account for every single expense in your budget and include a buffer for unexpected purchases as well. You never know when you might need a new tire on your car or refrigerator for the house!
Not Putting Enough Money Into Savings
Savings should become an integral part of your household budget. In order to have money for travel, a new home, or for unforeseen circumstances, you have to factor in your savings account and actually budget this savings. Do your best to make a decent deposit at least once a month. The word “decent” will differ for everyone, but make sure that it’s enough so that you have a cushion for necessities or emergencies, even if it’s a little at a time.
Forgetting Your Emergency Fund
It is important to have an emergency fund for any surprise expenses, including car or home repair or personal injury. Before you start building your savings account, you will want to have about $1,000 on hand in case of the unexpected. Work this into your budget so you can keep the fund filled as you work on other areas of debt or savings. I know that this may seem like a lot of money and not everyone has this on-hand, but keep it in the back of your mind as you begin to save and budget. Not having the money when you suddenly need it can add up to further credit card debt or having to borrow money from others. Give yourself a break by having this fund as soon as possible.
Complicating the Budgeting Process
Budgeting your finances doesn’t have to be difficult! Avoid using any robust software or system that will make your head spin every time you sit down to analyze or update your budget. Instead, use a simple Excel spreadsheet or just old fashioned paper and pencil. Get a small coupon organizer for receipts, as you can sort them by month or category. Read more cost cutting ideas and learn how to cut and keep your budget as well.
By avoiding these budgeting mistakes, you will be able to take better control of your money. Every dollar will be accounted for so that you don’t overspend or come up short before your next paycheck. Do you have any other suggestions of what mistakes people might make? Feel free to share them!