1. Failing to Revisit Your Budget
Budgeting is an ongoing process. As your financial situation changes, so should your budget. This is true if you got a raise, bonus or purchased a house.
If you don’t update your budget (often) you may lose track of your spending and overspend for months without realizing it until it’s too late.
The Solution: Check your budget at least once a month. This is a great reminder to pay your credit card and adjust any spending the following month.
2. Inaccurately Tracking Your Spending
It’s critical to accurately track where your money is going. Include your discretionary spending like coffee or snacks otherwise these small purchases can add up and throw your budget off.
Make sure to include semi-regular expenses ie. Amazon Prime, holidays and gifts. They are easy to overlook and can add up!
The Solution: Use a credit card where possible to easily know exactly where and how you’re spending and budget plan for the year. It is easy to copy and paste your transactions into our budget sheet. If you prefer cash, use the envelope method to ensure you aren’t over spending.
3. Forgetting about Income Tax
Your annual salary on paper isn’t what you actually take home after taxes and deductions. Use your last few paystubs to find our your take-home pay in the budget.
The Solution: For a realistic budget, you’ll need to create a spending plan based on your net or take-home pay
4. Not planning for Emergencies
Emergencies happen and are unavoidable. They come in different forms and costs and the only way to prepare for them is to create a buffer - auto repairs, home repairs, health or vet costs can eat up a large chunk of your budget. There are different levels of protection based on your individual needs.
The Solution: We recommend an emergency fund that can cover 3-6 months of your total living expense. You can start small and add a portion of your income each month until you reach your goal. If you have a mortgage, family, or partner consider having life insurance or critical illness insurance. As a last line of defense, you can open up a line of credit but use this only as a last resort.
5. Forgetting About Your Family
When you have a household, it’s natural to have shared expenses with your partner. Without frequent conversations about household and life goals, spending can go awry and can detract from your own personal goals too.
The Solution: Have a conversation with your partner and focus on the positive. Budgeting isn’t supposed to be a daunting task. Keep it positive and focus on your goals - wedding, travel, house, kids etc.. You don’t need to agree on everything either. Both sides will require compromise and if done right will only strengthen the relationship.
6. Not Considering Cheaper Alternatives
Don’t think your expenses are set in stone. You have more options than you think. Be creative in either lowering each expense or sharing expenses with friends and family. This is also a good time to ask yourself how often you use a product or service and if you need it anymore.
The Solution: Review all your expenses and see where you can trim down on cost. Reach out to your utility or mobile provider and see what better rate they can give. Split expenses like Amazon Prime or your Netflix account.
7. Setting Unrealistic Goals
Budgeting is not about sacrificing. The best budget is one that compromises your wants/needs/goals but you need to be realistic with what you can pay off and how long it will take for you to get there. This is a marathon, not a sprint.
The Solution: Be honest with yourself and what you can manage. Review your budget sheet regularly to ensure you’re achieving your goals. Hitting these milestones will also motivate you to keep going!
8. Trying to Keep Up With Friends
Your friends and colleagues may not have the same mindset as you and that’s okay! It may be convenient to go out for lunch every day with your colleagues but this can slow your progress.
The Solution: Be conscious of who you shop with or what you do that triggers your spending. You may have to change your mindset going into an event and set limits on how much you spend when you go out.