If you’re living paycheck to paycheck, you probably know how important a budget can be. Unfortunately, many people are making budget mistakes that make it hard to see a light at the end of the tunnel. The good news is you can avoid these mistakes. Whether it’s not leaving a buffer in your budget or not tracking what you spend, there are budget mistakes to avoid.
Not Leaving a Buffer
You always want to leave a buffer in your budget for the unexpected. For example, if you’re setting aside a budget for weekly groceries, leave a 10% buffer when making your shopping list. This allows you to grab a great deal that wasn’t listed without pulling money from somewhere else in your budget. When you sit down and look at your expenses, you really want to have at least 10% of your income that isn’t assigned to an expense.
Not Paying Yourself
Another budget mistake people make is to put all their money towards their bills, but not leave any money for themselves. You want to have money that can be spent on something you want each week (if you can manage it in your budget). Adults need play money. We work hard for our money and when we don’t use that money to buy something fun, it feels like we’re working hard and aren’t having any fun. Always pay yourself.
Not Saving for Emergencies and Retirement
You want part of your budget to be set aside for emergencies and for retirement. When it comes to retirement, you want to match anything your employer will contribute. If you’re self-employed, you want to make sure you’re putting back as much money as you’re allowed each year. This will not only give you money towards the future, but also lower the amount of taxes you pay each year. When it comes to emergencies, you want an account set aside to take care of any emergencies that may come along. If possible, place 20% of your income into an emergency account.
Not Tracking What You Spend
You always want to track what you spend. This will give you an idea of what your money is going each month. Assign a category to each to expense and add them up at the end of the month. This can be a real eye opening experience.
Not Cutting Unneeded Expenses
Once you’ve tracked your expenses for a while, chances are you’ll see areas where the money is going to waste. For example, it might be a morning coffee that costs $5 or a large satellite package that costs $150 a month. There are ways to enjoy the things you love without spending as much money. For example, you could get a Roku and cut your entertainment budget drastically.
A budget is a must for any family that feels as though they don’t have enough money left over each week. While it can be hard to create the perfect budget, there are mistakes you can avoid so that your money goes a lot farther each month.