words Al Woods
No matter what you’re trying to accomplish in life, there’s always some financial aspect to consider. Whether you’re just trying to make it through to your next payday or you’re planning for retirement, having your finances in order is a must. That’s why personal finance resources like budgets are highly recommended. When created and used effectively, budgets help you organize, manage, and control your finances so you can invest in whatever you need.
With so many different lifestyles and ways to budget, it can be easy to make mistakes. Believe it or not, even the smallest budgeting mistake can throw things off, causing significant problems. Here is a look at some common mishaps, their impact, and ways to prevent them going forward.
Not Recording Due Dates
A good budget should list all your expenses and financial obligations. It should also include due dates. If you have no idea when a bill is due, it’s easy to miss a payment or commit to a financial decision you can’t afford.
Put due dates next to bills on your budget so you can keep up with payments. You should also consider opening a banking account with direct deposit and scheduled transfer features so you can always ensure you have money to cover your expenses.
Forgetting Periodic And One-Time Expenses
Periodic and on-time expenses happen all the time. Whether it’s an annual membership, birthday gift, car maintenance, or taxes, leaving it out of your budget means you haven’t set money aside to cover the cost. That could result in late payments, account overdrafts, or the inability to pay for the expenditure.
Financial obligations have a tendency to change from one month to the next. If you have periodic or one-time expenses, add them to the list as you’re planning out your budget for the next pay cycle. If you tend to forget, create a reminder on your smartphone or online calendar to make it easier.
What happens when you’re in a jam and need access to quick cash to resolve the matter? Suppose your car breaks down, the plumbing malfunctions, or you’re out of work due to illness or injury. Would you have the money to tide you over? That’s why emergency funds are an essential budgetary item.
Having three to six months of expenses set aside in an account provides you with a financial cushion in the event that things go wrong. You can use money from your savings and avoid going into debt. Create a line item in your budget for an emergency fund and set a reasonable amount aside each month. Whether it’s $50 or $200, it will go a long way in helping you out when you need financial relief.
Making Decisions Without Your Budget
Budgets, when appropriately created, detail your finances in one place. It enables you to see what money you have, what you’re responsible for, and how much you have to spend. However, many people don’t review their budgets before making a purchasing decision. They guess or purchase impulsively and end up taking on more than they can afford.
Before making a financial decision, review your budget to ensure you’re not going to add too much to your plate. For instance, if you’re thinking about getting a new car, checking your budget will let you know if you can afford the down payment, car note, insurance, gas, maintenance, and repairs. It’s a lot better than buying the car and having it repossessed in a few months.
Yes, budgeting does mean creating financial boundaries so you can live within your means. Budgeting is also multi-faceted and time-consuming. Be that as it may, budgets make managing your finances and your life a lot easier. Ultimately, you need a budget. However, if you’re making mistakes like those listed above, use the advice to make changes so you can truly reap the benefits of this financial management resource.