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The Most Common Budgeting Mistakes and How to Fix Them

https://twocents.lifehacker.com/the-most-common-budgeting-mistakes-and-how-to-fix-them-1748191499

twocents.lifehacker.com

The Most Common Budgeting Mistakes and How to Fix Them
It's not too hard to build a basic budget, and a few tips and tricks can help you make it really solid. But even a good budget can go awry. There are a handful of mistakes that throw people off, but the good news is: these mistakes are easy enough to fix.

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Making Your Budget Too Strict

Budget for the life you have. When you’re going through your budget and assigning spending categories, be realistic. 

Don’t tell yourself you’ll never buy a single discretionary item, because you’re setting yourself up for failure. Give yourself some breathing room.

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Budgeting for a Life You Can’t Afford

This becomes a problem when you’re spending for a life you can’t afford. It puts pressure on your budget and encourages you to live in a paycheck to paycheck cycle.

Assess your financial situation, cut back on your expenses, prioritize your money goals, and then come up with a new spending plan.

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Budgeting Without a Purpose

It’s hard to stick to a budget that doesn’t have a goal.

When there isn’t one, your budget becomes an afterthought rather than a spending plan to reach your financial goals.

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Forgetting About Irregular Expenses

If you keep blowing your budget because expenses “pop up” every month, you’re probably not budgeting for irregular expenses.

It’s a common budget problem with an easy fix: find those quarterly, annual, and other seemingly random expenses, and add them in.

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Not Having a Cushion

It’s important to have an emergency fund. When your car breaks down, you have money to pull from, rather than screwing up your budget for the next few months until you get back on track.

It might take you some time and slow down your goal progress, but building an emergency fund will keep you from blowing your budget.

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SIMILAR ARTICLES & IDEAS:

A Monthly Budget For Your Money

No matter how little or how much money you earn, creating a monthly budget is one of the most important aspects of managing your finances. What gets measured gets managed.

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The Envelope System

The Envelope system is a way to track your variable expenses like food, entertainment, and drinks.

This method, preferably used weekly, allocates a certain amount in each category in labeled envelopes (food, drinks, movies, etc.). Once the envelope is empty, you are done spending in that category.

How to Create a Good Budget

The principles that make a good budget, something you can stick to:

  • Being Realistic: Being too strict is a recipe for failure.
  • Making Adjustments: A budget is not set in stone, but a fluid thing.
  • A Team Sport: If you live with a partner or spouse, you have to agree mutually on how to budget the financials.
  • Expect the Unexpected: Keep an emergency fund, ideally 3-6 months of necessary expenses.
  • Budgeting the Expected: Certain upcoming expenses need to be budgeted in advance, like property tax, holiday shopping, etc.

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When budgeting comes in handy

  • You have no idea where your money is going.
  • You’re chronically overspending.
  • You’re not saving any money.
  • You struggle to afford the things you really want.
  • You...

Definition of a budget

Definition of a budget

A budget is an estimation of income and expenses over a set time. It is usually drawn up and re-evaluated periodically.

Budgets can be made for a person, a group, a busines...

Understanding budgeting

A budget shows the trade-off made when one item is exchanged for another. The result is:

  • A surplus budget, where profits are expected.
  • A balanced budget, where revenues and expenses are expected to be equal.
  • A deficit budget, where expenses are expected to exceed revenues.

Drawing up a budget means you'll know where your money goes, and you'll have greater control over your finances.

Corporate budgets

Budgets are necessary for running any business efficiently and effectively.

  • Budget Development Process. Assumptions related to projected sales, trends, cost trends, and the overall economic outlook is established for the upcoming period. The budget is then published and outlines the standards and procedures used to develop it. The master budget includes forecasts of cash inflows and outflows, budgeted financial statements, and an overall financing plan.
  • Static Vs. Flexible Budgets. A static budget remains unchanged over the life of the budget. A flexible budget has a relational value to certain variables, such as sales levels, production levels, or other economic factors.