Budgeting doesn’t usually make the top of anyone’s want to do list. But having a budget is an important part of managing your money. Budgeting is the best, most practical way to keep track of your spending—and more important, to keep a grip on it.
Still, there are a few things you need to watch out for when making your budget. Budgeting requires mental discipline. And to help maintain that discipline, here are four budgeting pitfalls you want to avoid.
This is probably the most common error people make when they’re planning their budgets. If your grocery costs are $600 a month, then it isn’t reasonable to only $300 in an effort to save money. So keep all of your expectations, even the good ones for saving money, realistic and fair when you plan your budget.
Mistaking luxuries for necessities.
You’re absolutely convinced that those weekly massages are life-saving. But you could probably live without out them—if you had to, right?
Many things we spend money on dress themselves up as needs when they’re really wants, so don’t let yourself be fooled. If you don’t have to have it and you don’t have a comfortable place for it in your budget, then it’s time to let it go, at least for a while.
That hot stock you bought may earn back double what you paid for it in six months—and it may not. That 12-month CD will come due next month, but your car may break down and need major repairs.
So to keep your bottom line healthy and keep your sanity at the same time, don’t add the income from these sorts of “windfalls” into your budget. You’ll still find a place for that money, if and when it comes, trust me.
Buying before trying.
Rather than budgeting for that new motorcycle you think you need to help you save on your gas bill, how about renting one first—in January? Do you still think it’s such a great idea?
Many times we jump into things we’re stuck making payments on forever, all with the best of intentions. Trying some of these things out first could save us a great deal of money we could spread out in other places in our budgets. So the next time you have a bright idea, try it out before you plunk down your money—and you won’t have to cringe every time you make out that payment check.