We all understand that budgeting is the key to not spending more than you make. However, even people who budget might can have financial issues if they are making some of the common budgeting blunders. With the first quarter almost over, now is the time to review and catch these budgeting mistakes.
What is one of the easiest budgeting blunder to make?
Having an overly complicated budget with several categories is probably the biggest budgeting mistake to make. Too many categories often leads to budget burnout. Try to keep your categories to 10 or less and really focus on budget categories that you can control and avoid estimating your expenses.
Why is estimating your expenses one of the biggest blunders to make?
We all spend more than we think on everything we buy whether its food or utilities and we seldom remember all of the small expenses that can really add up. Estimating expenses as part of the budgeting process will only lead to an unrealistic budget that can’t ever be accomplished.
What is another budgeting mistake that people routinely make?
Not accounting for irregular expenses, ones that only happen one or two times per year, insurance being a good example. The best way to solve this issue is to create a savings for irregular expenses budget category so these expenses become part of your monthly budget.
Should people budget based on their gross or net income?
The preferred method is net income because that is what your really have to spend each month. The added benefit is that it eliminates the need to budget for taxes, insurance and other payroll deductions which simplifies your budget. Budgeting with gross income can create a sense of extra money.
Are there any social habits that can be detrimental to living your budget?
There are two: Trying to keep up with friends as it relates to possessions; and, shopping with free spenders that cause you to spend over your budget. It is easy to justify spending because of the spending of your peers.
What are key habits for having a successful budget?
Following these three habits will lead to a more successful budget experience:
- Tracking spending on a weekly basis
- Updating the budget allocations at least annually
- Including fun money as part of the budget