With all the advantages that come from personal budgeting, it’s no wonder that more and more people are relying on them to reduce debt and increase their savings.
However, ‘budgeters’ need to be careful to avoid some common budgeting pitfalls.
Credit cards may look like small square pieces of plastic, but they can cause a ton of trouble for the card holder if you don’t pay attention to your spending with them. Credit cards give you a mental sense that you can spend what you don’t have, and “owe it” later on.
Buying things that you wouldn’t ordinarily buy, for the sake of a credit card is common. Think about what you’ve spent in the last month. Now think about what you put on a credit card, that you probably wouldn’t have bought, if it weren’t for that card. No judgement; I’ve done it.
The best solution is simply to get rid of credit cards and start paying only by cash, or debit cards. Keeping a credit card handy for emergencies is something you might want to consider. Don’t carry it with you on a regular basis, perhaps freeze it, so it’s not readily accessible.
Another problem with budgeting is impatience. We set financial goals, but most of us don’t have the patience to actually see them through. For instance, you start saving for a new car, however, after a few months you discover the car of their dreams. Rather than waiting, you cave and you buy it. Discipline is a must to prevent impatience from breaking your budget.
Once you create a budget, you forget that you can adjust it when necessary.
A budget is created using a set of expenses and income figures that are probably going to change. Because these figures can change, it’s important that the budget changes to reflect the adjustments.
Of course we can’t forget about Christmas or Hanukkah, however lots of people don’t think about budgeting for holidays when creating a budget. So, adequate funds aren’t usually set aside for presents, food, parties, etc.
These items / events should be factored in and saved for throughout the year.
Finally, many people factor in transportation and accommodations for vacations in their budgets, however they underestimate money needed for food, entertainment, and spending money. Keep in mind that all the resorts and tourists areas are double or triple what you would normally pay.
With a little planning, you’ll be on your way to saving more money than you ever thought possible!