Budgeting is one of those all-important things you need to get into the habit of doing if you ever want to come out on top of your finances—something we all hope to do by the time we retire. However, not everyone was born with the innate ability to manage their money effectively. Successful budgeting takes practice, and there are mistakes that you can make along the way—some that prove more common than others. Avoid these mistakes people make when budgeting to make sure that your budgeting efforts are working for you rather than against you.
- Making unreasonable restrictions. You may feel inclined to push yourself to budget tightly, which is a good thing—if you can make it work. However, if you are constantly going over budget in main categories like food and utilities, then it could be that you need to give yourself a little more leeway with the necessities, and tighten up somewhere else. It’s also good to keep in mind that your expenses likely fluctuate from month-to-month, so you should be leaving yourself a cushion in each section of your budget.
- Not keeping up with your spending. Tracking your spending goes hand-in-hand with managing a budget. In fact, it is one of the first steps you should take before implementing a budget. Keeping up with how much you spend on food, bills, entertainment, etc. for one month will give you a better idea of how much you need to budget for each of those categories.
- Making impulse purchases. Impulse spending can lead to the downfall of a budget very quickly. Unless you happen to have an excess of cash, then spending on a whim likely means you are dipping into a non-relevant budget category to do so. The next time you think you are about to make an impulse purchase, stop and ask yourself, “Where exactly does this fit into my budget?” If you can’t answer the question, then don’t get it!
- Not paying yourself. Yes, you get paid from your employer, but you should also be paying yourself regularly. What does paying yourself mean? It means putting a portion of every paycheck into savings and including this as part of your budget. You should think of savings as critical a part of your budget as food and shelter—because one day, you will be using your savings to pay for those things!
- Not adjusting your budget regularly. Lifestyle needs change, the cost of living changes, and therefore, your budget should change to reflect that. You should review your expenses at least annually (if not more often) to determine where you need to make budgetary adjustments. Then, make adjustments and get acquainted with your new budget so that it will be easier for you to stick to it.
- Ignoring your budget altogether. There’s no point in having a budget if you don’t follow it! Among the mistakes people make when budgeting, ignoring one’s budgets is a mistake that happens all too often. It can be easy to get sidetracked, but remember that keeping up with your budget is what could make the difference between you being financially successful—or financially stressed out.
Avoid these mistake people make when budgeting to set yourself for a financial future that you won’t regret! To learn more about how you can secure your financial stability—specifically in retirement—contact our Ty J. Young Inc. financial advisors today at 877-912-1919!