budgeting mistakes.

Hello peeps!

You have done a proper budget monthly or yearly. But, if you’re not following the proper guidance, you may be setting yourself back more than you are actually getting ahead. Before you break out this month’s budget, take a minute to assess if you’re making any of these common budgeting mistakes:

NOT having one!

Not tracking your spending

Guessing on expenses

Forgetting about certain expenses (annual fees, taxes, etc.)

Not leaving any wiggle room

Not adjusting the budget/expenses as needs change

Not taking the time to periodically review the budget

Forgetting to set aside money for savings, an emergency fund, retirement, and investments

Whew! What a list!

If you notice that you are making a few of these mistakes each month, take a deep breath. It happens to the best of us! Now that you know what you might be doing incorrectly, let’s take a minute to focus on what you SHOULD be doing:

one; aiming to follow the 50/30/20 method.

50% of your monthly income should cover your fixed expenses (your needs), and housing costs should be kept at or below 30% of income.

30% of your income should cover your “wants” (personal improvement, dining out, etc.)

20% of your income should be reserved for savings and funding other goals

two; reviewing credit card and bank statements regularly.

Reviewing your credit card and bank statements from the past 3 months can help you understand your proper spending habits/expenses. It’s all too easy to guess what you’re spending your money on. When forming your budget, you should start by understanding how you’re currently spending your money so that you can figure out a plan and/or take action wherever necessary.

three; understanding how large purchases affect your budget.

If you plan to buy a home or make any other large purchase, make sure to first understand how it will impact your budget. For homeownership specifically, be sure to revisit this post to help understand what types of factors you may want to consider before packing those boxes.

four; revisiting the budget periodically.

After each month ends, go back and see how close you were to stick to your budget and financial goals. If you never retroactively review your budget, how will you know if it is working? Furthermore, if you don’t know where you might need help, how will you ever be able to correct and achieve your other financial goals and priorities?

Good luck with your budgeting.
Talk to you soon,
EMIR xx