You finally want to eliminate credit card debt and start saving money. That’s great! So you decided to create a budget. However, sticking to it is harder than you imagined. There’s lots of pitfalls that can deter you along the way. Here’s how to avoid these money mistakes on a budget.
Avoid These Money Mistakes on a Budget
- Not tracking your spending. If you’re on a budget, you absolutely need to track your spending by category. Tracking your spending allows you to evaluate where your money is going. By not tracking your spending, you easily fall into bad spending habits again. By evaluating your spending for the past three months, you can base the amount for each category on the average that you spent. This way, you can cut back on spending gradually without needing to rush or do any guesswork.
- Not creating an emergency fund. Emergency funds are vital in case of financial emergencies. You should aim to save three to six months’ worth of critical living expenses. These include bills, food, utilities, insurance, transportation, child care, and minimum payments. Set aside a certain percentage of each check to your emergency fund. So if you do have an emergency, such as a job loss or unexpected medical bills, you won’t get into more credit debt.
- Not looking for better deals. Are all your monthly bills fixed, or do you just think they are? Have you ever thought about contacting your creditors or lenders and negotiating better interest rates with them? Or possibly asking them to eliminate fees? You should investigate how to lower your monthly bills or at least shop around for everything from insurance to your phone provider and even your gym membership.
- Becoming consumed by your budget. It’s important to be careful with your finances. But it’s also important to have some fun every once in a while. When you deprive yourself of entertainment spending, you are more likely to give up and blow through your budget. Consider free activities or events. If you do want to splurge, make sure you plan for it by budgeting the amount you are going to spend and sticking to it. Use ACCC’s budgeting worksheet to help you.