taxguy

Often budgets fail because people fail to address their financial weaknesses. It is important that you sit down and evaluate your budget. Then come up with a plan on how to best deal with it.  The top budget busters are food, clothing and the miscellaneous category.  

• Many families eat out at least once a week. This adds up quickly and can easily push you over your budget. Plan your meals at least a week in advance, use crock-pots and purchase convenient meals to make at home to help cut down on eating out costs.  
• Clothing is another category in which it is easy to go over budget. Set yourself a monthly limit and then don’t go over it. Try shopping sales or consignment shops to get your money to stretch further.  
• The last category that people often spend too much on is the miscellaneous category. Earlier in our marriage, we had only four budget categories: groceries, entertainment, gas and other. Because the other category was so broad, we often went over budget. So we broke it down into specifics like household expenses, medical, gifts, automotive expenses, school lunch, diapers and miscellaneous. Then we figured out how much we needed in each of these areas. Now we are much less likely to go over in the miscellaneous category because there are fewer things that qualify. We also have a better idea of exactly where we are spending our money.  

When you are trying to find areas where you overspend, look at the small things. It is always amazing to me how quickly small things add up. My wife likes to buy soda and treats. She assumes she is staying within budget because the purchase price is so small. Yet at the end of the month, she is always surprised to see how much she has actually spent on these small purchases.  

Try switching to cash only for purchases that you go over budget on. I was always going over my personal spending money by going out to lunch and buying soda. So a few months ago, I switched to a cash only policy. Every two weeks I get a certain amount of cash. Then if I want to go out to lunch or purchase soda I have to use my cash. Once my cash is gone then my lunches out end as well.  

Making the necessary changes will not happen overnight. If you are spending a lot on clothing every month, it is not practical to say that you will just quit shopping. It will have to be a gradual weaning process. Evaluate how much you are spending or how many shopping trips you take each month and then cut it down. The next month, cut it down even more until you are where you should be. Obviously, you can’t completely eliminate shopping, so enjoy the money that you can spend. You might try shopping at less expensive stores so you can get more for your money.  

Be accountable to someone for your spending. My wife and I sit down every week and evaluate our budget. Download free software to track your budget. Each week we also discuss how much money we will probably spend. This process makes us accountable to each other for the money that we spend.  

Other pitfalls

• Not putting money aside for emergencies. Part of living debt free is having a small cushion saved in the bank for unexpected expenses that come up in everyday living. What if your car breaks down? Or your child needs a root canal? Prepare for the unexpected.
• Calculating your expenses based on two incomes. You may plan for both you and your spouse to work, but what if there is an unexpected illness or pregnancy? I recommend budgeting based on one income.

• Spending money as soon as you get it. For example, you get your tax return and go out and buy a Plasma television right away. Or you get a bonus at work and go out and buy that hot tub you’ve been thinking about. A much better idea is to put any extra small or large amounts of money into savings.

• Buying items on impulse. This includes buying anything that is not budgeted for. It could be a coffee every morning before work. Or perhaps you have a bad day and decide to spend an afternoon at the mall shopping. Remember, if you don’t have money set aside for it, don’t spend it.

These are just a few of the common budget mistakes people make. The main thing is to have a financial plan, and stick to it, no matter what.

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