One of the biggest budgeting mistakes out there is giving yourself unrealistic goals or expectations. It sets you up for failure, which in turn can cause you to avoid trying to budget in the future. When setting a goal make sure it’s realistic and aligns with your lifestyle.
Not Understanding Your Current Financial Situation
Understanding your current financial situation is key to creating a budget that you will be able to successfully stick to. For instance, your “out of sight out of mind” purchases like automatic monthly streaming services, apps, or fluctuating food purchases, can cause confusion when trying to set a budget for yourself. Do a deep dive into your finances to help you understand what you can realistically afford and also to help you figure out if there are things you are paying for that no longer benefit you.
Fail To Consider Fluctuating Or Unexpected Expenses
When setting aside your budget, don’t underestimate unexpected costs that can come up such as car repairs or medical bills. These events can very quickly derail any progress you have made. Consider adding into your budget, funds for an emergency savings account that you can pull from to help with these unexpected events.
Being Too Strict
Life still happens while you’re budgeting, you might want to buy a new dress for that new event or go out to happy hour with your friends. Wanting to splurge on something though or deviate from “the plan” can cause immense guilt. Allow yourself the ability to say “yes” to some of these things. If you are too strict with yourself it can have the opposite effect, where you end up going overboard on a spending spree because you’ve denied yourself any flexibility.
Relying Too Heavily On Credit Cards
It can become very easy to rely on credit card(s) for those impulse purchases that don’t fit into your budget. Having a large credit card payment every month, with interest accruing can defeat the purpose of budgeting and saving. Try to avoid using your cards and if you can, pay off your amount in full every month.
Overcomplicating The Process
Overthinking the process can cause frustration. Set up a budget tracking system that works for you. There are many apps and programs designed to help with budgeting. Do your research and decide what works best for you. Your budget system should make it easier, not harder to use daily.
You might not realize you’re even making some of these mistakes, but once you become aware it’s easy to start making changes to these habits. Budgeting can be a powerful tool to help you achieve your financial goals when used the right way and by being mindful of these pitfalls and taking proactive steps to overcome them, you can create a successful budgeting strategy that works for you.
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