We’ve all made mistakes dealing with money. Whether we’ve made a purchase we regret or we invested in the wrong stock. Or better yet, we never invested. Period. Whatever the case may be, nobody is perfect. But with budgets, we are made more accountable for our spending and how we live our lives. It can help keep us on track and our eye on the finish line, called financial freedom.
Yes, talking about budgets is boring. But just like doing laundry or mowing the lawn, budgeting is important. Most people actually find it difficult to reach their financial goals without a budget.
However, only 41% of people are found to follow a budget. That’s it. To make matters worse, around two-thirds of people have no savings at all to back them up. They are living paycheck to paycheck without any structure.
This causes people to fall into unyielding grasps of debt and the stress and anxiety that follow. This will make it so much harder to budget and reach your financial goals.
Save yourself the trouble and get on a realistic household budget. Understand your spending each month, broken down into categories, and come up with allocating percentages of your income to each relevant category. Just make sure to spend less than you make.
Unrealistic Spending Goals
An issue that causes people to fail in budgeting is creating unrealistic spending goals. Some may try to be aggressive with their saving and leave out important expenses like food.
If your budget is too restrictive, it’s going to be almost impossible to follow it. If you can’t follow it, you’re going to get discouraged and give up. Fix this problem by loosening the reigns on your strict spending and make some room for entertainment and free spending.
Create a category that will let you live your live. The happier you are during this process the more likely you’ll succeed. As long as your entertainment budget allocation is reasonable.
Not Writing Down Spending
Creating the budget is only the first step. You need to track all of your spending to make sure you are properly following it. Making spending decisions based on your budget is what will keep you on the right path. When you only rely on winging it and keeping track in your head, disaster will follow.
Try tracking your monthly spending in a spreadsheet or software built for this like Personal Capital or Mint.
Creating A Budget Without Help of Spouse
This is a good one. Trying to create and stick to a budget without consulting your spouse or significant other is going to lead to trouble. You need communication in a relationship and not telling them about this budget is a big no-no.
Have fun sleeping on the couch tonight.
Your budget is not realistic if both parties are not in total agreement over this budget. Use this opportunity to make sure you are both in agreement about financial goals. Work together to keep each other accountable for your spending.
Forgetting Long-Term Financial Goals
It’s easy to get focused on the short-term goals like paying off your debt or saving for a down payment on a home. Always look ahead to know what your next step will be.
If you successfully paid off your debt, start building up that emergency fund. If you already have that stuffed with 3 to 6 months of living expenses, move on to saving for retirement. Keep your long-term plan in mind when tackling your current financial goals.
Not Updating Your Budget
A budget is an ever-changing set of rules. You life is always changing and adapting to the times. Budgets are the same. You need to make adjustments to your budget and your life makes similar changes. Maybe you got a raise at work, got married or moving. Whatever the case may be, continue tracking your spending and adjust your budget to accommodate for these changes.
Consider reviewing your budget once a year or anytime big changes occur in your life. Make sure your financial goals are still aligned with your current budget and make any adjustments where necessary.
Getting Too Intimidated To Start
Getting started is one of the hardest steps. You need to rip off that Band-Aid and take a look under the hood. Seeing all that spending can be intimidating and very hard to look at. It can be full of surprises and cringe moment. Use this as an eye-opening experience. Make this a wake-up call to get your life in order and get started on a budget.
You should know everything you spend money on and where all your money is going.
If you have a large mountain of debt looming over your shoulder it can be hard to face it. You may just set up the minimum payments and go about your life, ignoring that growing shadow of consumer debt. It may work for a little while, but eventually that debt will catch up to you and make you face your reality.
Create a budget that will help you tackle that debt. It could take years, but if you are climbing that mountain, there is nothing to be afraid of.
Final Thoughts
Budgets can be fun, especially when you start to see results. You may be spending less on takeout or you’re finally starting to check off completing some financial goals. It’s a good feeling to see progress.
In the beginning, any progress may not be seen for a while. But if you stick with it, changes will happen. You just need to be patient and stick to the budget. Spend less than what you bring in and work hard.
Attaining financial freedom is a big goal to have and would be nearly impossible without some sort of plan. Create a realistic budget that will let you accomplish this. Doesn’t need to happen in a month. Do it right and not let other things suffer in the process as you’re rushing to the goal. Take your time and enjoy the journey.
