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5 Common Household Budgeting Mistakes

By manybanking.com Staff
Making a household budget is essential to getting your family’s finances in order. A household budget allows you to plan where your income should go and helps to track your monthly expenses.

Category Product: 
Savings
Category Finance: 
Personal Finance
Keywords: 
Budget, Establish a Budget, Saving, Money, Finances
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By manybanking.com Staff
Making a household budget is essential to getting your family’s finances in order. A household budget allows you to plan where your income should go and helps to track your monthly expenses.

Unfortunately, many people make simple mistakes when creating and managing their household budgets. Here are five common mistakes and how you can avoid them.

Not tracking actual expenses on your budget.

Maintaining a budget is a fluid process. Often, people make a budget once and then never revisit it again. In order to get the most out of your budget, it’s important to keep it current. What that means is inputting actual expenses each month to track whether you’re staying within your means. This also allows you to see how variable expenses operate within what you’ve established. For example, electricity costs in the summer are higher than in the winter because of the use of air-conditioning. Your budget needs to be adjusted to compensate for these variable costs. The use of budgeting software allows you to make adjustments to your budget easily as well as to track expenses. Budgeting software also helps you avoid making mistakes with calculations.

Not including contributions to savings.

Many people overlook budgeting for savings contributions. Often they decide to contribute whatever is left over to savings or ignore savings altogether. By not specifically itemizing savings contributions in the budget, many fail to make these contributions on a regular basis. Then, if any unexpected expenses arise, they find that entire budget has been demolished.

It’s wise to include contributions to an untouchable emergency savings account as well as a functional savings account for irregular expenses. The goal of an emergency savings account is to build up enough money to cover at least three to six months of monthly expenses.

Not planning for inevitable, irregular expenses.

Not all expenses come like clockwork each month. Some expenses are due bi-monthly, quarterly, or appear at random times throughout the year. Examples of such expenses include property taxes, car insurance, clothing, pet expenses (yearly vaccinations), medical bills, school supplies, gifts, and vacations. One way to budget for these expenses is to determine the annual cost and average it out over 12 months. Make monthly contributions to a functional savings account that you can draw from to cover these irregular expenses.

Not including every expense.

The only way to see exactly what you are spending your money on is to include all of your expenses big and small on your budget. You might not think you need to budget for buying lunch at work every day, but at $8 a day that adds up to about $160 a month. Failing to account for $160 a month could seriously throw of your budget. Keep receipts for everything you spend money on and input all of your expenses into your budget.

Living beyond your means.

It seems like it goes without saying that your income should exceed your budgeted expenses, but many people actually run their budget at a deficit. Often this is caused by making one or more of the aforementioned mistakes. A successful household budget should include paying off debt (more than the minimum payment on credit cards), saving for variable expenses and saving for true emergencies. If you do all of those things, your budget should help you live debt-free.

—For more ways to save, spend, invest and borrow, visit MainStreet.com.

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Making a household budget is essential to getting your family’s finances in order. A household budget allows you to plan where your income should go and helps to track your monthly expenses. Unfortunately, many people make simple mistakes when creating and managing their household budgets. Here are five common mistakes and how you can avoid them.

Not tracking actual expenses on your budget.

Maintaining a budget is a fluid process. Often, people make a budget once and then never revisit it again. In order to get the most out of your budget, it’s important to keep it current. What that means is inputting actual expenses each month to track whether you’re staying within your means. This also allows you to see how variable expenses operate within what you’ve established. For example, electricity costs in the summer are higher than in the winter because of the use of air-conditioning. Your budget needs to be adjusted to compensate for these variable costs. The use of budgeting software allows you to make adjustments to your budget easily as well as to track expenses. Budgeting software also helps you avoid making mistakes with calculations.

Not including contributions to savings.

Many people overlook budgeting for savings contributions. Often they decide to contribute whatever is left over to savings or ignore savings altogether. By not specifically itemizing savings contributions in the budget, many fail to make these contributions on a regular basis. Then, if any unexpected expenses arise, they find that entire budget has been demolished.

It’s wise to include contributions to an untouchable emergency savings account as well as a functional savings account for irregular expenses. The goal of an emergency savings account is to build up enough money to cover at least three to six months of monthly expenses.

Not planning for inevitable, irregular expenses.

Not all expenses come like clockwork each month. Some expenses are due bi-monthly, quarterly, or appear at random times throughout the year. Examples of such expenses include property taxes, car insurance, clothing, pet expenses (yearly vaccinations), medical bills, school supplies, gifts, and vacations. One way to budget for these expenses is to determine the annual cost and average it out over 12 months. Make monthly contributions to a functional savings account that you can draw from to cover these irregular expenses.

Not including every expense.

The only way to see exactly what you are spending your money on is to include all of your expenses big and small on your budget. You might not think you need to budget for buying lunch at work every day, but at $8 a day that adds up to about $160 a month. Failing to account for $160 a month could seriously throw of your budget. Keep receipts for everything you spend money on and input all of your expenses into your budget.

Living beyond your means.

It seems like it goes without saying that your income should exceed your budgeted expenses, but many people actually run their budget at a deficit. Often this is caused by making one or more of the aforementioned mistakes. A successful household budget should include paying off debt (more than the minimum payment on credit cards), saving for variable expenses and saving for true emergencies. If you do all of those things, your budget should help you live debt-free.

—For more ways to save, spend, invest and borrow, visit MainStreet.com.

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