Have you ever created a budget that you soon struggle to follow? Do you feel that budgeting is very restrictive? You are not alone. Here are some insight about budgeting that might help.
It is really frustrating to feel like you fail at budgeting. For starters, when we put a lot of thought to make the most out of our income and plan ahead so we can make payments, save and have some fun, we want that plan to work. However, sometimes it fails.
There are three common mistakes that most people make when it comes to budgeting:
Creating a budget for a “normal” month
You probably know what your fixed expenses are and, maybe, you’ve been budgeting for those normal spending you know you have every month. But then, you have an unexpected expense and you get frustrated because you can’t follow your budget. Actually, if you look closer, you will find out that these “unexpected” expenses that keep appearing month after month are not that unexpected.
Identify your random non-monthly expenses, make a list and assign an amount to each one. Add up all the amounts for one year and divide the number by 12. Set aside that amount into a separate savings account every month. This way, you have your stash for whenever this unexpected expenses pop up.
Every good budget includes a fun factor. You can’t live your life without spending a little money on yourself, so don’t feel guilty for that. The best you can do is include in your budget three big categories: money for expenses, money for goals, and money for fun.
This is also a good way of keeping yourself within your budget for longer, because let’s face it: if month after month you feel deprived, you are likely to drop any financial planning attempt and that is, ultimately, a bad idea.
Tracking every single penny
This can be exhausting and time-consuming. Instead of going down this road, a simple approach is dividing your expenses into two big groups: fixed and flex.
Fixed expenses are going to take up the same amount of money each month and usually, you can’t stop paying them: bills, rent, subscriptions, etc. Again, it doesn’t matter if they are mandatory or just because you want to pay for them, your Netflix subscription can be a fixed expense if you can’t do without it, and that’s ok.
Flex expenses, on the other hand, are those that require a bit of an active decision: where you buy your groceries, where you buy your clothes, etc. These things can have an impact on your budget, so plan accordingly and adjust as necessary.