Budgeting Mistakes & Proper Money Management

Published on December 11th, 2013

Learning to budget your money is vital to proper money management. Unfortunately, there isn’t a cut-and-dry way to budget money, but as long as you avoid these budgeting mistakes you will keep it where it needs to be.

Not keeping a budget planner.

How do you expect to know the state of your finances if you never write your income or expenses down? There is no way to be sure you’re not spending more than you’re making unless you keep track. By not managing your money, you let it manage you in the form of debt, bad credit and interest charges.

Thinking short-term.

A monthly budget is an excellent way to start, but it is difficult to account for less frequent expenses this way. Think ahead at least a year and budget one-time items and events such as birthdays and holidays, so your personal finances aren’t turned upside-down by one large purchase.

Being unrealistic.

There is no point in keeping a budget planner if it never matches up to reality. The ideal budget tracks real income and expense patterns while allowing you to plan for the future. If the estimates are consistently off, future finances will be unknown. To get estimates on track, estimate expenses for the next month, record actual expenses and see how they match up at the end of the month. This will help you learn how you are really using money so you can make more accurate estimates in the future.

Spending more than you earn.

The United States consumer debt is past $2 trillion – don’t add to it! Keeping your ongoing budget plan will help you track money coming in and going out.

Saving too little.

Savings shouldn’t be an after-thought; it should be budgeted like everything else. The traditional amount people save is 10 percent of one’s income, but whatever number you choose, put it in your budget plan and stick to it.

Not planning for emergencies.

Unplanned occurrences happen to everyone (medical expenses, job loss, home or car repairs) and you should be prepared. There should be a place for these funds in your budget plan ASIDE FROM savings.

Keeping an overly elaborate budget.

Making your budget planner too labor-intensive and overly detailed with most likely lead to you abandoning it. Everyone prefers a different level of detail, so find what works for you. If you are just starting, begin with a high-level budget and adjust it as you need.

Allowing your balance to get too low.

When your account balance is reaching $0, you’re reaching dangerous terrain. Budget yourself out of the predicament and set a new zero, whatever you view to be the absolute minimum. This will prevent you from losing money as well as provide a safety net in case of error.

Relying on bank and credit card statements to get it right.

Everyone makes mistakes – you can’t assume that whatever is on your bank or credit card statement is 100 percent correct. If you don’t occasionally double-check with receipts, you may be paying more money than you should.

Never adjusting your budget.

Your financial situation will change over time, so your budget should be updated accordingly with new sources of income and new expenses. Make sure the budget aligns with your spending habits. Keeping an archive of your budgets is a good idea as well so you can look back to determine what adjustments may need to be made.

Not accounting for interest.

You will likely come across a budgeting shortfall if you choose to neglect interest charges on credit cards and loans. You don’t need the exact amount of interest in the budget, but it is smart to make an educated guess. This allows you to see how much you’re paying to borrow money from creditors and lenders, and will ensure you have enough money budgeted to cover payments.



Courtesy of QuizzleWire

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