We all have to make a budget at one point or the other– whether in preparation for an event, for the month, or even for a trip.
For a few people, budgeting means a quick mental evaluation of future expenses while others might want to have all the details written or typed according to their preferences.
Budgeting is as vital as our expenses because it is an estimation of our income and expenses over a specified period.
It is a plan that guides our spending, helps us prioritize our needs, and importantly save up for the rainy days because they will surely come.
Many of us make unintentional mistakes when budgeting. We either underestimate or overestimate ourselves, leaving us with a deficit or a huge waste of resources.
Personal budgets are very useful in managing our finances over a short or long period. Here are common budgeting mistakes that might be harming your personal finances.
- Thinking “I don’t need a budget”
This might seem out of place, but many people honestly don’t see the need to budget whether as a result of ignorance, laziness or unwillingness to plan and track their spending.
The time to budget is now, budgeting is for everyone and it keeps us from ending up in an endless loop of financial struggles and wondering where and on what our money was spent.
And the good thing is– you can start small, say with a weekly budget and gradually make progress with the necessary consistency.
- Making and sticking to a budget for every period
It’s common knowledge that times are changing and so are our overall expenses. The inconsistency in the world economy coupled with inflation specific to different countries may make it difficult for one to stick to a particular budget for a prolonged time.
Hence, frequent review of your budget is important, at least to stay abreast of the market situation in your region and also adjust your budget. You can now manage your resources and prioritize properly even in unexpected situations.
- Thinking “I don’t earn much”
A lot of people are on this table, some dream of making millions before they start budgeting. Earning low or earning below your expectations is not an excuse not to account for your finances.
Even in the little, you have, once you’ve mastered budgeting you will find yourself being able to plan easily when you have much.
Think of your income now as a preparation for your dream income, managing and allocating your income now to your different needs will eventually, in the long run, help you once you start earning much.
- Not considering your debts
Yes, many people fail to realize that outstanding debts should be evaluated when planning to budget. Going ahead to budget while in debt is setting yourself up for a deficit, which in turn leads you to borrow more or spend more than you earn.
Proper planning on how debts would be paid should be included in your budget, this helps to gradually reduce your debts if you stay consistent.
- Lack of discipline
As the saying goes, discipline is the bridge between your goals and accomplishments, this statement cannot be ‘truer’.
If your goal is to watch your spending or save up or save up for something important, then discipline is what you need in accomplishing this, whether as a student, a monthly income earner or an entrepreneur.
You need discipline to keep you in check with your spendings. Discipline is as important as the budget itself because it is one thing to budget and another to follow the budget yourself.
- Not revisiting your budget
This is yet another mistake outlined, intermittently, your budget should be checked for adjustment where it seems too tight depending on the economic situation.
The prices of things, the people dependent on you, your utility bills, and many more things change with time and it is only wise to adjust your budget to fit your current situation.
Don’t be too hard on yourself, make sure what you’re budgeting will be enough for you because if you budget below your expenditure, you will eventually have to take out of your savings or even borrow.
- Failure to set aside money for emergencies
Emergencies always come in life, they could range from small to big and we can never tell at what time and where these emergencies might occur.
In other not to be caught unaware, it is best if when planning your budget, you set aside an amount of money for unforeseen emergencies.
In a case where there are none, this money can be rolled over to your savings or used for a good cause.
- Not setting aside ‘enjoyment money’
Man must unwind. After toiling and working it is only natural that we want to relax and have a moment to enjoy and engage in activities we don’t do regularly.
One thing is, at that moment when we tell ourselves we need to relax, a lot of things can make us spend more than we should, you notice this even more if you never had a budget.
Once you set money aside for relaxing evenings or fun trips, you automatically engineer yourself to think and know that you are only allowed to spend the money allocated for that event.
The importance of financial literacy is often overlooked and all sorts of mistakes are made when planning finances.
In a world that is rapidly changing, budgeting is one way to keep track of your spending and know what exactly you spend your money on.
It is also a good vantage point to see how your savings culture is progressing and how disciplined you are.
Start budgeting today, it will do you good. Which of these budgeting mistakes have you made?
