Many people have difficulty having any progress in the financial aspect of their lives, whether it’s getting out of debt, saving up a proper emergency fund, creating a retirement plan, saving for their children’s education, investing in various stocks, bonds, commodities, owning real estate etc. Instead, they live pay check to pay check, never having enough to live comfortably and rarely putting anything away to secure their future. Let’s go over some of the biggest mistakes made regarding budgeting your money.
One of the biggest mistakes is not even having a budget. How can you expect to improve your financial well-being without even a basic budget to stay on track? A budget will act like a set of guidelines, keeping you focused on your goals. The easiest way to make a proper budget is to take a look at all of your income and expenses and figure out a realistic amount you could set aside for your future. If you’re very behind on your debt, savings, investments, retirement etc, it might be a good idea to be extra frugal for a while or even get a second stream of income to get ahead faster.
Another large mistake when it comes to budgeting your money is going over your budget and constantly having to take out payday loans just to get to the next payday. First of all, you should have enough to get to your next pay check every time and if you don’t then perhaps you aren’t cutting back on your expenses as much as you could be, or you don’t have enough saved up for when the going gets tough. Secondly, payday loans are a vicious circle; as soon as you start then you constantly have to go back because of the interest involved. Even if you just borrow $200 to make ends meet, this means you’ll be $200 short next week, forcing most to go back and borrow again. Plus they have to add in an extra $20 or so in interest payments and although this doesn’t seem like much, the interest can add up rather quickly.
Many individuals also quit when the going gets tough. If they pull out $100 for food for the week and then run out on Tuesday (assuming they get paid on Friday), many people will pull out their credit cards and buy themselves lunch at a fast food joint. First of all, you’ll save money (as well as your health) if you prepare your own lunches ahead of time, and secondly, if you go into debt when your budget money runs out, you’re sabotaging any progress you might have. Unless you get paid much more the following week than you did the week before, you’ll constantly be trapped in that vicious circle again and you’ll never get ahead because of all the “extra” interest payments you’ll have to make just to break even. When you pull out your budget money for the week, hold out until the next time you get paid. If you run out of food, get creative instead of pulling out your credit card.