Save Money by Avoiding These Most Common Budgeting Mistakes
Building a basic budget strategy isn’t too difficult a frontier to conquer, especially if you have a steady income every month. Yet, even the most skilled budget enthusiast sometimes make mistakes when saving money along with surprise costs catching them out.
The following money saving tips will help you be more aware of the various surprise costs that can jump up and bite you when you´re least expecting them. If you are about to begin a new saving strategy, then these are the potholes you should look out for on that budgeting road ahead of you.
Too Many Rules
Budgeting is certainly not the most exciting part about having money, in fact it’s probably about as exciting as doing the washing or changing the cats litter box. However, it’s the end goal that should keep you motivated.
The biggest mistake people make is when they go into hardcore money saving mode is that they allocate all of their spare cash into a pot, leaving no money to enjoy themselves with. Overly strict budgets may be suitable for a robot, but as humans we need to reward ourselves now and then otherwise what’s the point in working? If you set the bar too high then you will most likely break some rules and feel disappointed which may lead to negative thoughts and before you know it you’ve spent $100 on something you didn’t need. When it comes to Budgeting 1.0, make sure you give yourself breathing room or blowout money each month.
Beware of Irregular Expenses
Saving money and budgeting towards your goal can be a struggle during at the best of times. When you get an irregular expense pops up, however, that could easily throw you back a month or two. Avoid getting caught out by adding those potential expenses into your budgeting plan. These surprises could come in the form of:
- Higher than normal utility bills
- Holiday spending
- Car insurance premiums
- Web hosting renewals
- Unpredictable pet bills (vaccinations or infections)
- School supplies
- Car issues (oil changes, flat tyres, new battery)
- Home repair costs
If you know there are a few things that may be coming up in the near future, e.g. a relatives wedding, a car service or back to school supplies, then budget smartly by accommodating these costs too. Try putting a small amount of money to one side each month to use to fight these little irregular costs so that they don’t throw you off your main goal.
Saving Money for an Unaffordable life
Put simply, don’t try to lead a life that you can’t afford. Using next month's pay check to cover this months expenses is a nasty downward spiral and things can get away from you very quickly, especially if a surprise cost jumps up. That extra fancy meal out or the top of the range Foxtel subscription can probably be done without or the funds put to better use elsewhere.
Ultimately, the less you have going out the more you can put towards your savings. So if you can live without the full options Foxtel package for 6 months, for example, to get you closer to your goals, wouldn’t that be worth it?
Budgeting with No Goal
Sticking to a budget that has no goal is not the best way to motivate yourself, as ultimately, what’s the point? If you save money for no particular reason then saving becomes an afterthought, it’s allocated less priority and you'll just end up spending what you like and save whatever is left - which gets you nowhere fast.
If you don’t have a goal now then create one. If your goal is big, then set smaller milestones to help you monitor your progress towards it. A very common rule that most money saving books talk about is the 80/20 rule which implies that you should save 20% of your earnings and spend 80% on your monthly costs.
No Cushion to Fall On
This goes without saying, budgeting and saving money in theory are simple enough, but in reality unexpected costs can pop up and ruin your big plan. Not planning properly for the unexpected can mess up months of saving if there is no financial cushion to absorb the cost of e.g. a car breakdown.
The main pitfall of people budgeting is often that they don't end up putting aside enough money each month. For example, if you spend roughly $70 - $80 on fuel then put aside $100. This tactic helps you use up more of your income to ensure your costs are covered each month, without being left short at the end. Nobody wants to be left in the position of not being able to put food on the table.
All of the above pitfalls are the most common that people saving money come across so my advice is to take pre-emptive moves, as I've described, to ensure you avoid them. If you have any money saving tips of your own that have helped you in the past, then please use the comments section below to share with us.