The idea of accounting for every bit of your income can be intimidating, but it is the best thing that you can do to avoid wasting money on things that don’t matter. You don’t require a math degree to set up an appropriate budget that will guide your expenditure. However, everyone makes financial mistakes from time to time, and that is just part of our lives. No human being is perfect. Learning about the common budgeting mistakes will significantly reduce the odds of committing them. Here are some of the budgeting mistakes that you can’t afford to make.
Failing To Track Your Expenses
It’s almost impossible to strictly stick to your budget if you can’t tell where your finances are going. Therefore, make a point of tracking your daily expenditure-whether big or small. The best way to keep track of everything that you buy is through updating your budget every night before you retire to bed while your daily bill payments and other purchases are still fresh in your mind.
You can also develop a habit of carrying around a notebook where you note down all your purchases and other expenditures throughout the day. Alternatively, you can install a financial app on your mobile phone that will help you track your spending from both your credit cards and checking account.
Forgetting One-Time Expenses
We are all used to the monthly expenses whether its cell phone bill, rent payment, or servicing of your personal loan Canada. However, most of us tend to forget about the one-time costs such as your homeowner’s insurance policy. As you sit down to come up with your budget, go through your bank statements and credit cards once again to establish all expenses that aren’t recurring and make sure that you include all of them in your budget.
Creating the Exact Same Budget Every Month
Setting a budget that is similar every month is a massive budgeting mistake that you should avoid since expenses tend to differ depending on specific factors such as vacation time, holidays, and birthday months. For example, energy costs will not be the same during warmer and cooler months. Instead of establishing a universal budget, try to plan each month separately and update your budget whenever things change.
Skipping the Emergency Fund
Never set up a budget without including an emergency fund. Always remember the fact that your emergency fund will eliminate the need to borrow money or start tapping your credit cards when an unexpected expense such as a sudden car repair arises. It is not a matter of if something will happen but a question of when it will happen. No matter how small your monthly income may be, always set aside a fraction of it in case of a financial emergency and include it in your budget.