What do you think about when you hear the word budget? For a lot of people, it’s a term with a negative connotation. That’s either because images of scarcity come to mind or they’ve never been very good at managing their finances. If you recognize yourself in this description, don’t worry about it. Nobody is born a financial expert and you’re not the only one struggling to make sense of money matters.
You must change your mindset in the first place. Budgeting doesn’t imply poverty nor the need to deny yourself life’s little pleasures – yes, you can still buy that cute outfit and keep your budget in check – and just because you weren’t great at it up till now it doesn’t mean you can’t turn things around and lean how to make smarter decisions in the future.
But if you’re going to be budget savvy from now on, you must first get to the bottom of things and see why your budget wasn’t working. It all comes down to the financial habits you’ve developed over time. That’s where the root cause of all your financial woes lies. Somewhere in there a mistake (or more) has seeped in, causing your budget to fail over and over again. So, let’s take a look at the most common budgeting mistakes people make and see if any of them seem familiar to you.
Too much credit
Or better said, too much credit card debt. Don’t get us wrong, having one or more credit cards is not a bad thing. It’s how you use them that can get you in trouble. No matter how good one is at setting budgets and calculating expenses, unexpected events still happen. Let’s say your car suddenly breaks down and you have to buy a new one or your home gets damaged and your insurance won’t cover for the repairs. Putting everything on your credit card sounds like a quick and effective solution. But if that turns into a habit and you “forget” to pay, soon enough you won’t be able to cover your credit card debt. A debt consolidation loan can help you, but the better option is to avoid getting there in the first place.
The curse of rash decisions
You refrain from irrational spending and manage to stay within your budget for weeks on end and then it hits you – that sudden urge to go on a shopping spree and buy everything that catches your eye. You browse the internet or pass a store window and you see it: the one item you can’t live without. Well guess what? 10 out of 10 people can live perfectly fine without buying that item that stole their heart at the mall or while shopping online. If shopping is your favorite pastime, you might want to look for a new hobby anyways. It doesn’t hurt to practice some self-control every now and then. You might find out you can even put some money aside and open a savings account. With Tangerine online banking you can open a savings account fast and easy, and manage all your banking operations from the comfort of your home.
Living from paycheck to paycheck
A lot of people have no choice but waiting for the next paycheck to cover their expenses. Others simply indulge in a hedonistic lifestyle, knowing that each month they’ll receive a certain amount of money into their account and that’s got their back covered. Except it doesn’t. If you’re too busy spending to do the simple math and see how much money goes into your budget and how much goes out of it, don’t be surprised when you wake up long before the payday and realize you’ve got no money left in your account. If your income doesn’t allow you to put some money aside for a rainy day, the least you could do is spend the money you have wisely. And if your revenue is generous enough, don’t waste it all recklessly. Having a savings account might be the wisest decision you’ve ever made in your (financial) life.
Having unrealistic expectations
Sometimes there’s a big discrepancy between the budget you envision and the one you can actually achieve. You’ve found the motivation to get your budget in check and you’ve decided to cut back drastically on your expenses. But is this plan feasible or are you simply lying to yourself? If you’ve been used to spending $500 dollars on going out each month, reducing that amount to $100 might not be very realistic. Instead of making promises to yourself that you can’t keep, you should try to come up with a plan that can be put into practice. Set your priorities straight and decide where you can cut back.
You’re not the analytical type
If you live your life by the motto a little less conversation, a little more action, then no wonder your finances are going downhill. You’re determined to make your budget work this time, but you have no idea where to begin and you have no clue what went wrong previously. Well, if you want things to improve, you must go back in time and analyze your past financial behavior. If you just start making decisions on a whim and expect to see results, you’re just taking shots in the dark. It all begins with a thorough analysis of your budget in order to identify the root cause of your problems. Once you understand where your money is going, you can make a plan to become financially stable.
You have a fixed budget
Your budget used to work just fine in the past but then, all of a sudden, it stopped working. Wondering why this unexpected change happened? Maybe the problem wasn’t the way you planned your budget, but the fact that your circumstances have changed. A budget is not something you plan once and then you can forget about it. You must pay attention to the changes that happen in your life and how they affect your financial situation. Maybe you make less money, your family has grown or you simply have more expenses than before. Whatever the case might be, you must adjust your budget to fit your current needs.