I am great at making mistakes but I truly hope that each time that I do, I learn something new. Although I like to be positive and optimistic about things as I believe that it makes life better (glass half full and all that…) sometimes a point is better explained when showing what not to do.
So here I have collected 5 points of what not to do when living on a budget – all from personal experience…. 🙂
Not Having a Budget
This point seems a bit stupid, but none the less it is the most important one, because having a budget is definitely a necessity in order for you to be able to follow it Building a budget is building a financial framework that we can work with and gives us the instructions for the way that we spend our money. More about setting up a budget here:
Not Following the Budget
Let’s say that you do have a budget, but you don’t follow it, then it doesn’t help much, does it? It is like have a gym club membership but not using it. Just like we won’t get in shape by paying for physical activity but not doing any (believe me, I have tried!), we will also not be getting in financial shape if we do not follow the budget.
Not Building a Realistic Budget
If I would run 10K every morning and/or only an apple and two crackers every day I would surely lose a lot of weight very fast and get into great shape, but it is just not very realistic that I would actually do it. Same thing with your budget; it should show a more or less realistic picture of your money and how you spend them. This means that you should be thoughtful of how you set your money goals and where it is possible for you to cut expenses. For example, rent can surely be cut down, but it is something that takes greater effort than cutting on clothing or groceries.
Not Planning Ahead
There are two types of expenses we often forget to include in the budget. On of them is the yearly expenses like car insurance, tuition, etc., that has to be paid on a yearly basis only and therefore often forgotten when we set up our monthly budget where we tend to include the monthly running costs only. The other kind of expenses are unexpected ones like car repairs, a new washing machine, etc. These expenses are hard to deal with as we don’t know what they will be or when they appear.
For the first kind of expenses it is important to identify them and to include them in the budget. For the second kind of expenses, a certain sum can be delegation to these kinds of expenses or an emergency fund is worth investing time and effort in.
So you tried and it didn’t work. Maybe it didn’t work out the way you wanted to this month and maybe you didn’t succeed to stick to the financial goal and framework that you had set up for yourself. No worries, there is always next month that brings with it a whole new clean sheet for you to place you budget on. Continue on and never give up 🙂