Sometimes despite our best intention we blow our budget. Often times this is due to budget blunders and dumb moves on our part. There are always reasons why a budget will self destruct. With the start of 2015 in full effect, millions of consumers are searching for creative ways to save money, build wealth and get ahead this year. Have you had problems sticking to a budget in the past? Perhaps you have committed one or more of these classic budget killers.
Lets go over some of the more common reasons why peoples budgets fail.
Cutting back too far on entertainment:
Often when making a budget we scale back entertainment way to far or even worse cut it out all together. We are only human and we need to be rewarded for all the hard work we do. It is human nature to want to unwind and treat ones self now and then. Your budget needs to include this. If your entertainment budget is higher than 10% then it is time to cut back but 5 to 10% of your monthly expenses is acceptable with 5% being your ideal target zone. If you eliminate entertainment all together then your budget may fall part.
Not saving regularly:
This is more of a money management issue but it does come into play with a budget. You need to budget for both short term and long term savings. If you fail to set aside anything into savings one small disaster can come along and wipe out your budget, but if you have savings set aside, especially a rainy day or safety net fund you are protecting not only yourself but also your budget. It helps to set up automatic savings through your bank or via automatic payroll deductions.
Over using your credit cards and plastic:
If you feel the need to budget and have had a hard time curbing your spending then part of the problem may be your use of credit and debit cards. We often do not “see” using them as money. Instead of using your plastic use cash regularly. Save debit/credit card use for online purchases or only when you cannot pay in cash. Doing so also helps curb impulse buying. Using cold hard cash makes you think twice before handing that hard earned cash over.
Paying only the minimums on your debts:
Nearly all debt has one thing in common – Interest. When you only pay down the minimum you are incurring more long term debt. Long term debt takes more out of your long term budget. It is far better to suffer temporary financial pain by biting the bullet and paying down those debts as quickly as possible. Paying down your debts as quickly as you can frees up available cash flow and makes it easier on your finances once the debt and resulting interest are no longer a factor. Also paying only the minimum can cost you hundreds or even thousands of dollars in the long run.
Have more going out than coming in:
If you spend more than you earn your budget will implode. Much of this problem comes from using to much credit and using credit for frivolous things. Budgeting success means living within your means and using credit for necessary things only. You need to keep a certain frame of mind when it comes to your spending.
You can stick to a budget if you avoid the pitfalls listed above. Remember a budget is 90% a state of mind and will power.
Steven Moore is the head editor with BestCreditCards.co a leading consumer portal covering credit cards, credit scores and consumer finance.