You know why most people skip budgeting altogether? This is because they keep making blunders after blunders – consciously or unconsciously. Some people create a budget but they are not brutally honest about it. Needless to say, that budget doesn’t work.
Similarly, some people plan a budget without checking out the figures. They just guess their monthly expenses and create a budget instantly. This budget isn’t going to work either since people are likely to spend more than what they estimated.
Let us look at the common budgeting blunders people often make. Make sure you don’t commit these blunders because if you do, then your budget plan is bound to fail.
1. Expecting full cooperation from your partner when she doesn’t have any clue
Are you living together? Are you married? If so, then you need to have a discussion about the budget with your partner. Think logically! If your partner doesn’t know anything about budgeting, then how will she cooperate with you? She might spend too much money without thinking about the repercussions.
Suppose you have allocated $500 for ‘food’ category. You’re cooking meals at home every day. But your partner is dining out with her friends every weekend. Needless to say, she spends more than $500 and your budget plan fails.
2. Not planning for the unexpected expenses
Do you know what helps you cover your unexpected expenses? It is an emergency fund. An emergency fund helps you cover your car repair expenses and medical emergencies without breaking your budget. If you don’t have an emergency fund, then you’ll cross your budget to cover your unexpected expenses.
3. Not including your fun expenses
Understand one fact honestly. If you don’t allocate money for your fun expenses, then there are higher chances for breaking your budget. You need to plan for your splurges. You need to allocate an amount for your splurges in your budget. Make sure you stick to it. Otherwise, you’re likely to spend more than what you earn one day.
4. Differentiating between wants and needs
A common mistake that people often make is they differentiate between their needs and wants. When you create a category as ‘need’, you don’t think about cutting down your expenses on it first. You can club your ‘needs’ and ‘wants’ into the same category, but this makes it difficult. For instance, food is your basic ‘need’. Dining out is a ‘want’. Your primary needs are clothes, shelter, and food.
5. Thinking that your monthly bills are fixed
Several people think that their monthly bills are fixed. For instance, cell phone bill and cable bill. It might be true that you’re paying a fixed amount on your monthly cell phone and cable bills. Probably, this is why you never think about the ways to cut down your costs. But if you think rationally, you’re doing a mistake. There are a hundred ways to save money on your monthly bills. For instance, if you shop around, you can get better deals on your gym membership, insurance, cable connection, etc.
If you haven’t thought about the ways to reduce your expenses, then it’s time you do. Think about the ways to trim your electricity bill.
A final note
Don’t be afraid of the ‘B’ word because this will increase your chances of making mistakes. Believe me when I say that Millennials are good at money management. As per the statistics, 67% of the millennials stick to a budget successfully. If they can, then why can’t you? Follow the 50/20/30 formula. I’m sure you’ll be the master of your budgets one day.
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