Successful Budgeting — 10 Mistakes to Avoid
Have you ever got into debt, or struggled with paying large bills?
Do you ever wonder where your money has gone when you check your bank balance?
If you don’t have a budget and keep track of your expenses, it’s difficult, if not impossible, to manage your finances effectively.
Here are ten budgeting mistakes to avoid when setting up and maintaining your budget.
1. Spending All Your Salary
The cost of basic living expenses and non-essential items soon adds up, so it’s not surprising that many people spend their whole salary — and more. This is probably the worst mistake to make. Spending money unwisely soon leads to financial problems.
To avoid this, write down everything you spend money on for a couple of months. Look at your figures and see how much you can save.
As your salary increases, save more. Update your budget twice-yearly, so that you can see where changes need to be made.
2. Failing to Keep an Emergency Fund
Large expenses, such as car repairs and hospital bills, often crop up unexpectedly. Knowing that you have an emergency fund prevents panic and saves you from worrying.
Pamela Capalad, the owner of a financial planning company, has her clients open a “Now Fund,’ a savings account where they set aside an amount of money each much for unexpected purchases.¹
3. Spending Too Much on Holiday
It’s easy to over-spend when you feel relaxed on holiday. To avoid getting a nasty shock when you go home and see your statements, plan how much you can afford to spend on your holiday carefully.
Work out the large expenses, such as plane fares and hotels, first, and then see how much you can afford to spend on the rest of the trip.
Impulse buying can be costly as well, but it’s part of the fun of the trip. Decide how much you can afford to spend in the shops, and either take that money in cash or keep track of your expenses using an app such as GOKONG.
Budgeting for your holidays will give you peace of mind.
4. Spending Too Much on Small Things
Shelling out on day-to-day items soon runs down your cash. Do you really need to have your morning coffee at a café, and eat your lunch out each day? Small things like these soon add up.
Write down how much you spend on non-essential items every month, and see where you can create savings. Perhaps you can make coffee at home, and take a packed lunch to work, for example. Set aside a certain amount each month for these items, and stick to your goal.
5. Paying Too Much for Utilities and Insurance
It takes time and effort to find out whether you’re paying too much for your utilities and insurance, and many people never seem to find the time to do this.
Avoid this mistake by scheduling some time at the weekend to compare the costs of different companies and services. Look on comparison websites to compare prices and coverage.
Study insurance policies carefully to find the one with the most reasonable prices, and suitable cover for your needs. Include health insurance as well, in case of emergencies.
6. Spending Too Much at the Supermarket
There are several ways to save money on groceries, such as making a list and keeping to a weekly budget.
Preparing a list helps you avoid impulse shopping, if you stick to it! One way to do this is to use a meal-planning app, such as Big Oven and Copy Me That. These apps provide recipes, and generate shopping lists.
Choosing supermarket own-label brands over manufacturers’ brands is another simple way to save. They are usually just as satisfactory, if not better, and much less expensive.
Shop just before closing time. Swiss supermarkets often mark down products that are close to their expiry dates at this time. Supermarkets also reduce prices on Saturdays, because they’re closed on Sundays.
7. Not Budgeting for Special Occasions
Have you ever been caught out by not budgeting for Christmas and other special occasions? Sometimes, several birthdays fall in the same month, and there is little money left for gifts! Here are some ideas for avoiding these situations.
Set aside a certain amount for special occasions each month, so the money you need is at hand. Another suggestion is to budget for one Christmas gift each month, buy it and put it away! Then, your lovely presents are all ready for Christmas, and you don’t need to stress about finding suitable presents at affordable prices.
8. Not Budgeting for Once or Twice-Yearly Payments
Many people forget about planning for the cost of once or twice-yearly payments, such as home insurance and dental check-ups. These can be high, and it’s best to avoid being shocked by the amount of the bill when it arrives.
Paying for these in full in the months that they fall due is often difficult, but it’s easier if you set aside one-twelfth of the total cost of these things each month in a special savings account. Remember to check whether the costs of your once and twice-yearly bills are increasing.
9. Not Updating Your Budget
Your budget will change as your income and circumstances alter, and it will differ from month to month, so it’s a good idea to review your budget at least once a year to see what’s working and what’s not, so you can make modifications.
It’s also a good idea to plan for different stages of life. People in different age groups have different financial priorities and goals. While people in their twenties often concentrate on buying or renting a property and improving their careers, people who are close to retirement will be consolidating their funds and working out a yearly income.
10. Making Your Budget Too Strict
Allow some room in your budget for unexpected miscellaneous expenses, spontaneity and just having fun! So, don’t make your budget too strict, otherwise you’ll feel resentful and spend too much anyway!
Use these budgeting tips to gain maximum value from your income and save for the future.
