A budget that’s full of mistakes won’t do much to help your finances. If you really want to get your finances on track, you should avoid these three major budgeting mistakes.
Mistake #1: Forgetting about Emergencies
You should always incorporate emergency savings into your monthly budget. Why? Without any emergency savings, a surprise expense could turn your entire budget upside-down. You might have to use money reserved for other essentials to cover the surprise expense, which could force you to run out of funds before your next paycheck. This one problem could have a terrible ripple effect on your finances for months.
To avoid this stressful situation entirely, you should include emergency expenses as a category in your budget. Calculate how much you can reasonably dedicate to this category every month and automatically deposit it into a savings account the moment your paycheck comes in. This will be your emergency fund. You can use your emergency fund to help you manage urgent, unplanned expenses like car repairs, home repairs and appliance replacements.
What if you don’t have enough savings? If you don’t have enough emergency savings and a surprise expense crops up, you can charge the expense to your credit card and pay down the balance later. Or you can apply for a personal loan. There’s no need to make an appointment with your bank — you can apply for personal loans online as long as you meet the qualifications. If you’re approved for a loan, you can use the borrowed funds to manage the emergency expense and then make repayments afterward.
Mistake #2. Not Tracking Your Expenses
You can’t set your budget and forget it. You need to actively track your expenses and confirm that you’re actually following the guidelines that you set for yourself. How else can you be sure that your budget is working?
Tracking your expenses can also help you spot bad habits that you’ll want to change. For instance, you might notice that you tend to make a lot of impulsive purchases when you’re stressed or upset. Knowing this could push you to find better strategies for coping with stress—strategies that won’t have a negative impact on your monthly budget.
It’s hard to fix bad habits when you don’t even realize they’re there. Tracking your expenses will help you spot them so that you can take the initiative to resolve them.
Mistake #3. Not Embracing Technology
Is your budget written on a piece of paper? Or organized on a simple spreadsheet? If so, you’re making things unnecessarily difficult for yourself.
By downloading one of the best budgeting apps on the market, you can put together a far more effective budget than anything you can make on a piece of paper. Budgeting apps can connect to your financial accounts, including your checking accounts, savings accounts, credit cards and major loans. Being connected to your accounts will make sure that you have an accurate view of your income and get real-time updates on all of your digital transactions. This way, you’ll have a much easier time tracking your money.
Another benefit of budgeting apps is they can help you reach your savings goals (for instance, filling up an emergency fund). You can see exactly how much progress you’ve made towards your goal and how much further you need to go.
Avoid these basic budgeting mistakes! Your budget will be so much better without them.