Creating a budget is a great idea, it can allow you to take full control of your finances and help you highlight areas where you need to cut back on spending to save yourself money.
However, when creating a budget, many people make simple mistakes and end up damaging their finances further.
So, how can you create a budget and avoid the common budgeting blunders?
· Don’t forget about your hobbies
It is important to realize that budgeting isn’t just about planning for your essential spending, but you must also plan for your free time too. For example, if you watch soccer once a week, and this costs you $10 a time, you should include this into your budget.
It is surprising how many people actually forget to do this and end up not budgeting for the money they need to enjoy themselves.
· Don’t spend more than you earn
Although this is obvious, it is easy to forget – especially if you’ve got a credit card. You should keep track of how much you spend – every time you spend. That way, you know exactly how much has gone out of your account and how much you have left in your account.
If you use a credit card to do all your spending, you may find it particularly hard to keep track of your spending. Credit cards allow you to spend money you don’t actually have, which can be a dangerous thing to do and land you in some pretty big debt.
· Don’t forget your ‘emergency fund’
Every month, I set around $80 aside in case of emergencies that need paying for. If you fail to do this, how will you pay for repairs to your car or home? Or what about if the dog goes into the vets – how will you cover the cost of that?
How much you set aside is up to you, and will depend on your lifestyle and how much you earn each month. Just make sure you set enough aside (plus a little extra) in case something unexpected happens and you need to pay for it.
· Don’t underestimate your spending on essentials
When deciding how much you are going to spend on food, for example, make sure you are as precise as possible. Don’t just write a figure down without planning it out, because you will probably find that it won’t be enough, and you will be left struggling to afford other things because you didn’t plan properly.
To make sure you get a clear idea of how much you plan to spend, you should write down everything you need to buy from your local store each week, and then use the internet to find out the average price per item.
If you can’t find the prices this way, do a ‘dry run’ at the local store. Just walk round and make a note of how much each item will cost you before you head in and buy them.
When you have the prices, add them up and this will give you the amount of money you will need to budget for food shopping. It’s always best to add a bit more to this amount in case you need to buy other items, and to allow for price rises.
For more information try –
Comments