Budgets are the cornerstone of good personal finance. Budgets aren't meantto be set once and forgotten about but require revisions and logical changesover time. Without one, you're likely to overspend and have little saved forthe future. These are five common mistakes that people make when budgeting.
In the past, people used to writechecks. After each transaction, they would write the amount down and thenbalance their checkbook. But, with the invention of the debit card, peoplesimply swipe and go. Many never track their spending and this could lead tooverdrafts if you spend more than you have in your account. This is why it’s agood idea to set up spending alerts, so you know just how much you arespending.
Many people make the big mistake ofguessing at monthly bills. This can lead them into troubled waters if theirincome doesn’t match the amount needed to pay the bills. Just a slightdifference in bill amounts can start to add up. So, never guess and find outexactly how much you owe and put it in the budget.
Some people simply fail to createan emergency fund and when something happens like a job loss, all bets are off.This can make your life fall out of control, and not having an income can put ahuge burden on your family.
If you and your significant othercan’t get on the same page financially, things can turn bad quickly. Manypeople make the mistake of not having an open dialogue about expenses. Forinstance, you are both pulling money out of the same bank account but neitherof you informs the other when you make a purchase. This can lead to overdraftswhich could end up costing you a lot.
Finally, probably the most commonand biggest budget mistake you can make is not having a budget. Many people gothrough life not even knowing how much they are spending. This can set them upfor a financial disaster. So, if you don’t have a budget, it’s time to sit downand make one. It won’t take you long to complete the budget, and it will giveyou peace of mind knowing where your money is going. Remember, it’s better tobe safe than sorry.