According to a Gallup survey, only one in three Americans have a monthly household budget – an essential component to reach this goal. If you are serious about getting your finances organized in 2019, be sure to avoid these six budgeting mistakes.
1. Not Setting Goals
Before creating a budget, your financial goals should be clearly defined. Do you want to spend less on non-essentials? Save enough to pay off credit card debt? You are more likely to stay committed to disciplined spending with a distinct end goal.
2. Waiting too Long
Your budget should be created in advance of a new month, so you can start fresh. The billing cycles have renewed and you can get a clear picture of all expenses. When you plan ahead, you can also account for unexpected expenses that may arise.
3. Making Assumptions
From month to month, some expenses are locked in – student loans, car payments, etc. – while others fluctuate, like heating and cooling. Rather than guessing, look back at least three months to get an estimate of how much you need to set aside for such expenses.
4. Lack of Tracking
After you take the time to create a budget, it’s important to track your expenditures. How will you know you are sticking to a budget if you do not reconcile spending? Easily record purchases with expense tracking software you can keep on your smartphone or computer.
5. Too Many Restrictions
Having a budget does not mean you have to eliminate fun! Saving money and responsible spending are important, but you should set aside a small amount for discretionary spending, whether for date night, a spa day or new shoes.
6. No Emergency Fund
When unexpected expenses arise, such as emergency medical attention or a sudden home repair, you don’t want to drain your budget. Instead, keep an emergency fund on-hand to draw from in urgent situations. Experts recommend saving three to six months of expenses.
The Ion Bank team is here to help you meet your financial goals. To learn more about your options, contact us today!