Budget mistakes

 

When we think about budgeting and dieting most of us conjure up images of limitation, going without, even deprivation maybe.? But neither necessarily deserves such a bad wrap!

We create a budget so that we have a spending plan for our money, we can keep track of where it is going and as part of that process we are taking control of our money.

We embark on a diet so that we can lose weight, feel better and as part of the dieting process reinforce some healthy eating habits into our lives.

But there are some common themes in our attitudes towards both budgeting and dieting that shed some light on budgeting mistakes and where we can get tripped up along the way.

Lack of motivation

We all start with the best of intentions when it comes to both, but often we end up lacking the motivation to continue. A new year brings new resolutions and the prospect of turning over a new leaf. We excitedly jump in and create a budget or set about a new diet and no sooner do we find ourselves online purchasing that pair of shoes we thought we were getting for Christmas while munching on a double choc brownie.

Truth be told, budgeting like dieting only works if you are emotionally invested in it. Just like a diet, you have to make decisions every day that impact your budget, so if your hearts not in it ? the idea will get old quickly. As women, when it comes to our finances we tend to focus less on the dollar figure and more on what value we assign to it.

So rather than focusing on the detail of the budget ? try and focus on the purpose. Why are you budgeting? Is it to save a deposit for your first home or investment property or is it so that you can go on an overseas holiday each year with the family? Whatever it is, picture it and get emotionally invested in that image. ??Then next time you have the urge to blow the budget take a second to search for that mental image of what budgeting success actually looks like ? and find your motivation to avoid this budget mistake.

We don?t allow enough flexibility in the plan

It?s become more acceptable these days for a cheat meal or a cheat day to be incorporated into even the strictest of diets. The purpose is to provide some relief or leeway in what is otherwise a fairly regimented plan for eating. By factoring in a little splurge at regular intervals along the way, we are not only being more realistic but it can help to stave off the feelings of hopelessness when we stray from plan. It keeps us on track and can avoid another budget mistake.

I advocate for the same thing when it comes to budgeting. As a financial planner we would routinely apply at least a 10% buffer to discretional spending in a client?s budget; this is common practice. Whilst every attempt is made to forecast our spending down to the last dollar when preparing our budget ? we cannot predict with exact accuracy our future spending.

Life has a habit of throwing up unexpected expenses and we all have months were we lose sight of the bigger picture or just say stuff it and book that holiday anyway. Keeping a buffer in your estimates means you?re less likely to be disheartened when you circle back and see the impact.

We choose the wrong system

Don?t choose Paleo if you?re a vegetarian. Obviously you wouldn?t, but you get my drift.

There is no one way to budget. Everyone?s budget is different and everyone puts their budget into action differently. Some people will create individual categories for every expense while others prefer to lump everything into more general accounts like income, fixed expenses, discretionary expenses etc.

Some people prefer to monitor their spending by using cash because their money is more valuable to them that way. Others prefer to use their credit card for everything because they can track their expenses better. You need to pick a system that works for you and be consistent. You know your strengths and weaknesses best. Trying to change the way you feel comfortable operating your budget and you?re only making things more difficult for yourself.

Like losing weight by dieting, budgeting requires a little trial and error to get the best results. But keeping the above budget mistakes?in mind will hopefully help with making at least the budgeting a success!