- By p1fcu
- Posted on March 23, 2018
- 0 comments
The most important step to effective money management is developing and maintaining a budget. That sounds easy and even simplistic. But if it is so easy, why are so many people deep in debt? And when people try budgeting, why are so many unable to stick with the plan? Let’s take a look at some common budgeting mistakes we see here at GreenPath.
1 - Using credit to make ends meet. When people find that their expenses exceed their income, they may try to find a way to make their budget fit their expenses. This is a big mistake. Excessive use of credit cards for normal living expenses like gas and groceries may be a sign that income is not sufficient to cover expenses. Outside of emergencies, credit cards should only be used when you already have money in your checking or savings account to cover the charges. A better and more successful approach is to find a way to make expenses fit the budget.
2 - Failing to track expenses. Tracking your spending is essential to successful budgeting. Keeping track of how much you spend on a daily basis may even reveal an area of overspending before it becomes unmanageable.
3 - Not including savings in the budget. Savings should be treated as a priority, just as you would consider a mortgage or a car loan. We suggest that you include a savings category in your budget, and pay it like you would any other high priority obligation.
4 - Borrowing from one category to fund another. If you find that you have exhausted all of the money allotted for one category in your budget, don't borrow from another category to cover those expenses.
5 - Putting yourself in tempting situations. If you know that you have a hard time resisting certain purchases, avoid tempting situations. For example, if you know you have exhausted your clothing budget for the month, don’t go to the mall.
6 - Not communicating with your spouse. In order for a budget to work, all family members must communicate and not hide any spending.