Posts Tagged ‘budgeting mistakes’

Budget Blunders – 3 Reasons Why Your Budgeting Plan Always Fails

There are several common budget blunders that people make, often without realizing it, and they keep on wondering why their budgeting plan always fails. Many of them eventually stop budgeting at all, as they build up this assumption that budgeting is nothing but a waste of time. It is very important for you to understand that the problem is never with the concept of budget but with the way you do it. If you are walking on the wrong path, you will never reach the right destination. If you keep on changing your paths without proper planning and vision, you will reach nowhere at all. Therefore, if you are serious about creating a successful budget plan, you must first learn how to do it the right way. Avoid the following mistakes.

There Is No Place For Fun In Your Plan

One of the biggest budget blunders people often make is that they cut out all the fun stuff. When they create a budgeting plan, they assume entertainment as a waste of their hard-earned money. But, such assumption does not stay for long. Very soon, they again start spending (this time even more than before) on fun and entertainment, which eventually damages their planning and they never manage to achieve their financial goals. You must understand that entertainment is a crucial part of life; you just cannot live without it. It is just that you must spend wisely on it. A practical budget must allow you to use at least 5% of your total monthly income on fun and entertainment. You can go up to 10% depending upon how much you earn and how much money you need for your regular essential expenses.

You Are Not Consistent With Your Savings

Consistency is the key to success of a budgeting plan. Inconsistency with the savings plan is one of the most common budget blunders. Many people, who mostly work on impulses, often end up either getting a hit or miss with savings. The first month, they save a fortune; the next month, they save nothing and spend a fortune. It is very important for you to understand that money management is a race where only the one who is slow and steady wins. Therefore, whether you are saving for long-term or short-term, make sure that you have a very specific regular monthly plan for it. You can consider implementing automatic payroll deductions to ensure consistency with your monthly savings deposits. Even if the amount you are saving per month is as small as $100, if you consistently save only that much every month, you will be able to create around $6800 of savings fund in five years (assuming the interest you receive on your deposits is also as small as 5%).

You Are Still Not Following A Strict Cash-Only Diet

If your budgeting plan keeps failing all the time, it simply means you are making a few budget blunders. For example, you probably are still overusing your debit or credit cards. You work hard, day and night, to earn your money, but it takes very little effort to lose it. In order to make yourself more disciplined with your spending habit, you are strongly recommended to follow a strict cash-only diet. When you use cash for every purchase, you will have a better idea on whether you should really make a purchase (or can manage to avoid it) and how much money you can afford to spend. This way, you will also be able to avoid impulse buying. You will acquire better spending habits, which will go a long way when it comes to putting your finances back on track and achieving the kind of financial freedom you always dreamed about.

Always remember, the success of a budgeting plan depends more on “spending less” than “earning more”. If you can manage to combine both, you can achieve tremendous results. But, while you are cutting out your expenses, make sure you are doing it in a practical way. You can also avoid the above budget blunders by being consistent with your savings strategies.

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