Want to make your budget work in 2018? The key is avoiding the many potential budget busters that will come your way this year. This should make for a more successful budget and a better financial outlook.
What’s the most common budget mistake to avoid?
Not having all of your expenses in your budget. Often it is the small dollar amount but frequent purchase that really destroy our budget. The small daily expenses may not seem like a real expense but could be $150 or more per month that can wreck anyone’s budget.
What is another common budget mistake?
Setting up a budget and then not actually tracking your expenses to confirm your spending matches your budget projections. The issue is that once you overspend, your subsequent monthly budgets have a decreasing likelihood of being successful because we tend to continue to spend at previous levels.
How can this problem be solved if someone doesn’t have time to track all of their expenses?
The key is only tracking those expenses that are most likely to change and that you have the most control over. This would be food, entertainment, and clothing for most people. These are the categories where most people overspend on a regular basis.
What is one budget item that most people miss all of the time?
Without question the biggest missed budget item are those non-monthly expenses – this includes sports fees, insurance, annual dues just to name a few of the common ones. Others include the occasional medical expense that might not be covered.
How is the best way to handle these expenses in your budget?
For medical expenses, save regularly in your health savings or flexible spending account. For all the others, have a budget item for not regular expenses and transfer those funds on a monthly basis to a savings account explicitly for those expenses. That way you will have the money whenever they are due.
Is there a common mistake that can drastically ruin a budget?
For many people, whether they have a formal budget or not, it’s the financing of something new that can put their financial life in a tailspin. It could be a new expense such as a loan or an increased expense such as buying a car with a higher payment. If they don’t review their budget or consider if they can really afford it, they can make a commitment that they really can’t support without making changes in other areas.
What is the one move that can most improve the chances of a successful budget?
Building an emergency fund for life’s little unexpected expenses is one of the best moves to ensure a successful budget. We are more likely to experience the need for car repairs, home repairs or emergency medical needs than we are drastic circumstances such as a loss of a job. Being able to absorb the $250 expenses using savings is probably the most significant way to avoid budget pitfalls.