Time and time again, you may have heard of the no-fail advice to have a budget. Maintaining a household is no easy feat, unless you’re like one of those millionaires who don’t have to worry about their finances. But do you know if your current household budget style is the best for you? Or are you unknowingly creating some of the biggest mistakes?
Even the most seasoned of all homemakers have a lot to learn about budgeting. You have to get it straight that keeping a household budget doesn’t mean depriving you or your family of some of the things you want. It means being smart with your expenses and lifestyle so your monthly budget can buy all you need, give you ample savings, and enjoy a few of the finer things in life here and there.
You can be the queen of your household finances by ensuring you don’t commit again these biggest household budget mistakes:
1. Creating An Unrealistic Budget
One of the mistakes you could be doing is creating an unrealistic household budget. This means you’re under-budgeting some categories and perhaps over-budgeting in others. As much as you want to be frugal, this goal shouldn’t get in the way of keeping a realistic budget.
For instance, you can’t follow the budget of a family with just one kid if you’re a family with three children. Under-budgeting some categories will only make it harder for you to stretch the limited resources you could be working with.
To avoid creating an unrealistic budget, you may want to abide by these tips:
- Make sure you and your spouse are on the same page regarding the budgetary allocations as you can never expect to have a budget that works if both income earners aren’t united;
- Understand your current financial situation by tracking your income and expenses;
- Trim costs if you find some areas in your budget that you realize are unnecessarily high;
- Get out of debt fast as one of the top budget-eaters is always the amount you allocate for debt payments;
- Set a budget for long-term expenses like the kids’ education so that when the season for paying for school fees and supplies comes, that expense won’t burn a hole in your budget or put you in debt.
A personal finance site like Dollar Financials can help you get started with budgeting if you need improvement in this area.
2. Not Having A Budget At All
Another one of the biggest household budgeting mistakes is not having a budget at all. As unbelievable as it may seem, there are households that don’t have a budget. If you’re that kind of mom, then you may want to start having one. While it may have worked well for you to just wing it and go forth from one month to another, this practice may not necessarily be what’s best for your family in the long run.
You may find it tedious, but having a budget and adhering to it is one of the best ways to avoid getting crippled in debt in the future.
3. Not Accounting For Excessive And Frivolous Spending
Having a household budget doesn’t mean you can no longer enjoy some of the things that make you happy. You and your family can still go on weekend trips or eat out as long as you’ve accounted for it in your budget. If you can’t afford that five-star resort for this year’s holiday, then don’t force it. Stick to what your budget can afford.
Not accounting for any excessive and frivolous spending you and your family may have will only hurt your financial security in the future. It’s up to you to ensure that every single expense is accounted for, whatever amount you’ll spend for eating out or going on family holidays.
4. Leaving Out Recurring Items In Your Budget
Another typical error that’s done by those writing down a household budget happens when they leave out some recurring items in their budget. No matter how little that expense may be, as long as it’s one you know you pay for regularly, every bit of your expenses has to be accounted for.
For example, you might have left out your public transportation fare expense as you can use your spare change for that, but it does add up in the long haul. What if towards the end of the month, you no longer have some spare change? How are you going to afford that week for train payments?
Or, you know that three months from now, it’s your sister’s wedding. Surely, you have to give her a gift. It makes sense to include that in your budget for that month, so you’re certain you aren’t hurting your budget just to buy that present.
5. Not Having Any Category For Emergency
For many homeowners, expenses for emergencies will be taken from their savings account. There isn’t anything wrong with this, not until the emergencies keep coming frequently. This week, the car broke down. In the same month, you also had to pay for plumbing expenses, then on the next week, you needed a new refrigerator.
When the emergency expenses pile up one after another, your savings can significantly go down the drain. To avoid this from happening, it’s wise to have a separate budget for emergency expenses. If you don’t have an emergency for this month, the money is always carried forward in the subsequent months
If you have an unexpected expense like the need to buy a new fridge, you may have enough to cover that from your emergency savings account.
If, despite having a household budget, you noticed that your financial situation still hasn’t improved or you’re still going through a hardship, you may not have been budgeting the right way.
While there’s no fixed and fast rule to getting the house budget accurately, an awareness of the common budgeting mistakes above can help you become more effective at budgeting. Steering clear of those mistakes can help you survive even the most challenging of all financial situations you and your family will face.