Let’s be real, nobody likes to budget. And while many of us always say that we want to start sticking to one, we either never get to it or start cheating after a while. But knowing how to budget correctly can be one of the best decisions you’ve ever made in your life and start you on the path towards financial independence. The worst mistake is that many cannot stick to a budget because they didn’t know how to make a good one in the first place. Here are some more of the most common mistakes people make when making a budget and how to avoid them.
Guessing Your Monthly Costs
If you want to reduce your spending, then you have to have a clear assessment of your monthly expenses, no guesswork. Pull out your bank and credit card statements for the last 3 months and take a look at your average monthly spending for each category. Once you know exactly how much you’re spending, you’ll be able to reduce your outgoings and set realistic targets.
A lot of people think that they’ll be able to ride it out and cut their fun expenses completely if they’re trying to save for something down the line, but that’s a sure recipe for disaster. You’ll eventually crack and start cheating. If you’re working hard, then you’ll need to set money aside to decompress, or else you’re going to explode.
But you have to be clear as to what constitutes entertainment. You shouldn’t put dining out in the same category as food for instance. Dining out should be viewed as a luxury while food is a necessity. And if you’re into things like online gambling, then you’ll have to factor that into your entertainment budget. If you like gambling online a lot, you’ll have to either stick to certain days, or cut down on other activities. You could also do some online gambling at PlaySugarHouse and other sites that offer welcome bonuses and free spin options. That will allow you to test their gameplay and reduce your overall costs.
You’re Not Taking Quarterly and Annual Bills into Account
In some cases, it can be easy to forget quarterly bills and get caught off guard when you get them. However, keeping track of monthly bills is much easier. Water bills are often set quarterly, but you can always call your water company and ask them if they can send you monthly bills instead. While not all will be able to do so, some will be more than happy to accommodate you, so don’t be afraid to ask.
Not Having an Emergency Fund
You just never know when something may happen, and you always need to have enough savings if a major appliance breaks down, you have to do some important repairs on the car, or you have to pay for medical expenses. Ideally, your emergency fund should be enough to cover you for three months of expenses, so find out what this amount is and start saving every month until you’ve reached it.
Drafting and sticking to a budget isn’t always easy, but it always pays off at the end. Make sure that you steer clear from these mistakes if you want to reap the benefits from responsible spending.