The Most Common Budgeting Mistakes That People Make
A budget is an essential part of when it comes to managing your finances. But, that does not mean that budgeting is easy. Millions of people throughout the UK find it difficult, confusing and even stressful but how can they change that? Unfortunately, sometimes as humans, we struggle to become motivated when something goes downhill, but that does not have to stop you. Therefore, we have put together some of the most common budgeting mistakes people make and how to avoid them.
Not keeping the same budget
When it comes to budgeting, it is not a short process. There is no possible way to tell whether your budget is working or not without the process of trial and error. Therefore, to get a feel of different budgets before you find the right one, you need to take time and keep the same budgets for a short period of time. By ‘short period of time’, you need to give yourself a chance to get a true understanding of whether or not that particular method is for you, most people tend to take a few months to decide.
So, it is definitely important to stick to a budget until you know for sure that it is not the one for you, then you can change and try something new. But if you are continuingly switching between different budgeting methods, you will make it very difficult to find one which works with your finances and your spending.
Forgetting about tax
When creating your budget, to begin with, you need to make sure you include everything you possibly can. This way you will not need to add anything later along the line which you may have forgotten as this may impact your budget. Income tax is one of the most common things which people forget. The tax is deducted from your wage every month, so when planning and incorporating everything you need to into your budget, make sure you remember to check everything you need too instead of guessing.
Missing out important expenses
It is much easier to remember the expenses which we pay daily, weekly or monthly because they have a constant impact on our finances. But, some of the most important, biggest expenses which we pay perhaps yearly will sometimes be forgotten about. Although, typically they are the most expensive and definitely ones which should not be forgotten.
So, when you are planning your budget we recommend that you take a couple of days to ensure that you have not missed anything off your plan. One way you can do this is by reading over previous bank statements to get a realistic idea.
Not savings for emergencies
Although just paying for the bills and paying for things that you would keep you satisfied, it’s one of the biggest budgeting mistakes. Yes, you need to section your income to be able to pay for your bills and essentials, but you do need to incorporate other things too. Saving money for emergencies is something which everybody should be doing as you never know what is around the corner. But, did you know that a fifth of UK workers have no savings at all, so if you do not either, you are not alone.
You should find a budgeting plan which already includes saving for emergencies in it. This way, you do not have to adjust the percentages and you are able to adapt your finances to what the plan suggests.
Your budget is too restricting
The last thing that you want is to feel too restricted and like you have no freedom within your budget. Everybody should allow themselves enough money to entertain themselves and treat themselves every so often. We are not suggesting you splurge on unnecessary things every week leaving yourself with no money for bills or savings but you should definitely allow yourself some freedom.
If your budget is too restricting you may begin to feel demotivated, therefore, losing interest to sort your finances. But, that is not something which would benefit you. Therefore, again, we suggest that you find a budget which allows you freedom and room to treat yourself when necessary to avoid making this budgeting mistake.
If you ever find yourself in a position where your budget has failed and you are in a financial emergency where you cannot pay for essential bills, there are a few steps you could take. Before applying for a loan we suggest that you explore every other option as the last thing you want to do is end up in further debt. You could try borrowing from family or friends or even using savings if you have any. If no other option is available, you could apply for a short term loan. But you need to ensure that you can afford it before making any choices.