According to a survey, 56% of Americans aren’t able to cover a $1,000 emergency expense with their savings. Do you fall into this category? Time to make a few changes and avoid the most common budgeting mistakes.
Saving money seems simple enough. Each paycheck or each month, you put money aside for bills, savings, and other expenses. You set the money aside but then you find yourself dipping into those funds.
All of a sudden, you need extra cash for gas or there’s an unexpected expense you must now cover. Do you need to pick up a second job or do you have a budget problem? Continue reading below for a list of common budgeting mistakes to avoid!
Not Calculating Your Monthly Budget
The first biggest mistake in budgeting is not knowing your budget at all. You can’t budget your money if you don’t know the difference between how much money you bring in each month and the cost of your expenses. To calculate your budget, you’ll need to sit down and do some math.
If you’re income and expenses are complicated, then hire a financial advisor to lend you a hand and create a monthly budget planner with you. Otherwise, calculate your monthly income and subtract your monthly expenses from it to determine how much money you have leftover.
Failing to Track Your Spending
We’ve all been there before. We think we have more money in our accounts than we do and end up spending more money than we should have. This isn’t uncommon but can be easily corrected when you track your spending using a budget planner.
Stop blindly spending your money and failing to track what you spend, get Quickbooks desktop or similar accounting software to record all your expenses in one place. You might not think too much about that cup of coffee each morning until it adds up to a bigger monthly expense.
When you track your spending, you’ll learn what things you spend money on that aren’t necessary and where you can cut back. You’ll also catch errors, even small ones, to prevent fraud and other discrepancies.
Forgetting to Calculate Small Expenses
When calculating your budget, don’t forget to factor in all of those small expenses as well. You know to budget in gas money and the expenses of home products, but don’t forget to factor in the cost of that coffee each morning or your daily bus/train fare.
Small expenses might seem like no big deal, but they add up and are an important part of your monthly budget. If you work for yourself and drive to see clients, you should know the standard mileage rate set by the IRS. If not, you’re missing out on a potentially large deduction to save yourself money come tax season.
Not Planning an Emergency Fund
After determining your budget, start an emergency fund. Begin putting money into this fund when possible. You never know when you might need to access this money unexpectedly.
Unexpected expenses should be another essential part of your budgeting guidelines. Put this money aside and forget it’s there until needed. When your HVAC system stops working or you’re faced with an unexpected medical expense, you’ll have the funds to cover it.
Avoid These Most Common Budgeting Mistakes
Preparing a budget for yourself takes a lot of planning. Use the helpful information given in this guide above to ensure you avoid the most common budgeting mistakes people make. Take your time creating the best budget planner, and you’ll find financial stability.
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