We all know budgeting is great for our finances. The question is, how do you make sure that you’re budgeting correctly, to give yourself the best possible chances of success?
While there’s no one-size-fits-all strategy for creating the perfect budget, there are several mistakes that people make when they’re trying to get control of their spending habits. Ultimately, it’s important to remember that changing your spending strategies is a process that takes time, focus and dedication. To boost your chances of leaving dangerous spending behind, avoid these common budgeting mistakes.
Mistake 1: Setting Unrealistic Expectations
It’s great to have high hopes for your budget, but it’s important not to go too over the top with what you think you can achieve. Ultimately, if you’ve been saving nothing every month for the last year, then it’s not fair to assume that you’re going to be able to adjust your spending and suddenly have £50 left to play with at the end of each week.
Think about where you can cut back on certain parts of your budget gradually. For instance, if you currently spend £300 on food for two people each month, you could try gradually reducing that to £250, then £200 a month instead.
Mistake 2: Overlooking Irregular Expenses
It’s easy to remember all the everyday expenses that we face, like mortgage or rent payments, good shopping, and utility bills. However, if you want to make sure that you’re getting the most out of your budget, you’ll need to make sure that you’re taking irregular expenses into account too. For instance, are you setting money aside for your TV license and water bills? Do you have cash to tap into for birthday celebrations?
Forgetting the unexpected costs can mean that there’s always something to pop up and ruin your budget strategy. If you’re not sure whether you’ve missed anything on your plan, try leaving a small emergency fund in your bank each month.
Mistake 3: Going Too Complicated
Your budget can be as advanced or simple as you like. Ideally, if you’re just getting started with a budget for the first time, it might be a good idea to keep things simple. You don’t need to include a category for everything. Instead, consider combining your household expenses and food budget into the same space.
At the same time, make sure you have a strategy you can use to keep track of all your spending too. For instance, some people will prefer to use a pad of paper or an excel spreadsheet. Other budgeters might find that they have more success using a budgeting app on their smartphone.
Mistake 4: Forgetting to Have Fun!
While it’s tempting to push yourself as hard as possible when you’re trying to reach your savings goals quickly, it’s important not to be too strict with your budgeting strategy. If your budget is too strict, then you’re not going to stick with it. Make sure that you include something fun in your budget too, so you don’t feel like you’re giving up on everything you enjoy when you’re handling your expenses.
If you like going out once a week with your other half for a fancy meal, but you can’t afford to do that and have a savings account too, then try cutting down to two meals a month, and then one. That way you still have something to look forward to, but you’re spending a lot less.
Mistake 5: Not Setting Goals
While budgeting can be its own reward, it’s often better to have a plan for your money. Setting goals ensures that you push yourself harder when the going gets tough because you can see a light at the end of the tunnel.
Ask yourself why you want to budget in the first place – for instance, do you want to be able to afford a family holiday, or upgrade your house? Once you have your goal in mind, make sure that you put measures in place so that you can track your progress over time.
Mistake 6: Not Tracking Success
Finally, budgeting can be a lot of hard work. It’s important to make sure that you can see yourself making progress, otherwise, you’re going to have a hard time meeting your goals. Keep a note of all your achievements, and how much you’ve saved each month.
Remember, if you fall backwards a couple of times on the road to success – that doesn’t have to be the end of the world. Sometimes it takes time to make a successful budgeting strategy.