Common budgeting mistakes and how to avoid them.
Budgeting can be tricky. This is particularly true if you’ve got a wide variety of different expenses that need to be accounted for before you can think about saving. As a result, there are all sorts of different mistakes that people make when trying to set up a new budget. These can make it incredibly difficult to boost your bank balance – either by inputting the incorrect figures or simply making the process more complicated than it needs to be.
To avoid these common issues, it’s important to know what they are and how to steer clear of them. Here are four to keep in mind.
1. Guessing costs.
A good budget is an accurate budget, and the more detail you put in, the more you’re likely to get out of the process. It’s important not to guess at expenses, and instead, include precise amounts for any outgoings you may have during a month. This includes rent, utilities and other essential costs such as grocery shopping. To work out costs for some of the less fixed expenses (such as food), take a look back through your account balances for previous months to work out an average. You may be surprised at how much you spend, so this is also a great time to identify any areas where you can cut costs, such as buying a coffee every morning or paying for parking instead of taking public transport.
2. Not tracking expenses.
While monthly expenses are relatively easy to account for with a bit of research, other costs can easily slip under the radar, particularly if they’re intermittent or one-off. An example of this is your annual car inspection, which could set you back a few hundred dollars. Not allowing for these sorts of costs can sink even the most thorough budget, so make sure to include any large expenses that crop up throughout the year.
3. Being unprepared.
Even the best budgets can’t account for unexpected costs such as falling ill or becoming the victim of theft. While the right insurance policy can go a long way towards protecting your financial situation, there may be certain circumstances where you have no choice but to dip into your savings, to ensure this doesn’t negatively impact your budget, it’s a good idea to set aside a small chunk of money in the event of any accidents. This emergency fund will help to provide you with the wiggle room you need to remain financially stable without sacrificing your savings.
4. Being too strict.
Lastly, it’s easy to get very strict with yourself after you’ve created a budget, but it’s important to keep in mind that any saving is a good saving. If this is your first attempt at putting away a significant portion of your income, you may find it incredibly difficult to cut out all of the daily expenses you hadn’t thought about before. While limiting these is important, it’s a good idea not to be too hard on yourself and allow for a few luxuries, such as the occasional takeaway coffee or night out on the town. Without these, you’ll be miserable, which can have just as big an impact on your savings attempts by affecting overall motivation.
To get started on your saving journey, contact Beyond Bank today.