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Budgeting Basics: Budgeting Mistakes to Avoid

Tracking expenses

One of the ugly truths about budgeting is that when you keep track of your expenses, it’s painfully clear when you’ve gone off track. 

Write it down when you’ve gone over your budget. The negativity you feel will help prevent you from overspending more or doing it again. Just think of this step as damage control.

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IDEA EXTRACTED FROM:

Budgeting Basics: Budgeting Mistakes to Avoid

Budgeting Basics: Budgeting Mistakes to Avoid

https://www.investopedia.com/university/budgeting/basics6.asp

investopedia.com

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Key Ideas

Common budgeting mistakes

  1. Not Tracking Expenses: it's impossible to stick to your budget if you don't know where your money is going.
  2. Buying on Impulse: Impulse buying is expensive. 
  3. Becoming the Victim of Budget Busters.
  4. Being So Frugal It Makes You Miserable: you’ll binge later and throw all your hard work out the window. 
  5. Trying to Do Everything as Inexpensively as Possible.
  6. Not Asking for Help.

Being frugal and miserable

If you try to deprive yourself too much, you’ll binge later and throw all your hard work out the window. 

A spending binge can set you back far more than treating yourself occasionally, so go for the occasional minor splurge. Just keep your treats within your spending limits and you’ll be fine.

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SIMILAR ARTICLES & IDEAS:

Budgeting = creating a plan to spend your money

Budgeting is simply balancing your expenses with your income.

It's a plan for the coordination of resources and expenditures. When you budget your money, there’s a desir...

How to create a budget
  1. Gather Some Financial Information: gather a detailed list of your income and expenses.
  2. Select a Budgeting Method: figure out how you’ll budget your money to meet your most pressing financial goals.
  3. Create Your Budget: tally up all your expenses and income to see where you stand and allocate expenses.
  4. Execute Your Plan: you can use a notebook, pen and paper, a spreadsheet or an online software.
  5. Reward Yourself: you can work a small percentage into your budget to treat yourself each month.
The 70:20:10 budgeting method

This method suggests that you allocate 70 percent of your income to expenses, 20 percent to savings, and the remaining 10 percent to debt.

70:20:10 may work for someone with a healthy emergency fund and minimal debt.

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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...
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.

...

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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