I know what you’re thinking. “Man, when is this personal finance blogger going to stop talking about budgets?” Never. Or, not right now at least. Maybe sometime. Don’t worry, I’ll give you fair warning if I do.
The thing is, budgets are pretty darn important, and there’s a lot more to them than just developing them. A budget requires vigilance and maintenance, to make sure it is accurate and you’re sticking to it.
I don’t know how many times I’ve made a budget and then immediately decided to break it. Either I didn’t care enough to stay on track or I wasn’t diligent enough to keep up with it.
The problem with a budget, particularly for someone who is struggling financially or at the beginning of their savings journey, is keeping track of everything and making sure they stay on top of it. There are lots of small actions that inadvertently break our budget, beyond the random decisions to fly to Boca Raton for the weekend. Let’s take a look at 5 actions that will destroy our budget and how we can combat them.
1. Not Checking Your Mail
This may come from left field, but checking your mail helps you keep track of your expenses. Seriously. This is one of those things that a lot of people may scoff at, but there is a lot of information in your mailbox, both physical and virtual, that you may not be aware of. If you fail to open your mail consistently, even if you just let it sit for a week or so, you may be missing out on important information.
First of all, there may be bills that sit there, which you have forgotten. When they do come around, there may be hefty fees attached to them. Additionally, you typically receive bank statements in your mailbox. Open it and read it! I know, you’ve seen your spending, you know what happens. But looking at your actual bank statement can reveal some new information to you – such as unexpected expenses, incorrect charges, or fees and fines from the bank itself. Know where your money is going.
2. Not Setting Up Automatic Payments
While setting up automatic payments can lead to an “out of sight, out of mind” attitude, there are numerous benefits. For one, you won’t be assessed late fees anymore. These are the bane of anyone’s financial existence, because they are entirely unnecessary. You are being charged extra money because you didn’t pay money you already should have had. That’s nonsense. Set up automatic payments and save yourself some extra money.
Many companies will offer incentives for automatic bill pay, such as no fee for credit cards or waiving a $2 charge. Take advantage of these.
The main reason people don’t set up automatic payments is typically because they don’t know if the money will always be available. I understand that as an issue, but if you can set up enough of an emergency reserve in case that happens, then set up the automatic payments so you don’t have any extra charges or late payments.
3. Un-budgeted “Splurges”
Shopping sprees are bad for budgets. It’s exactly like binge eating for your diet. If you just decide, willy-nilly, to throw your budget to the wind and go out and purchase a nice leather jacket and some high-end amenities, you’ll blow your entire financial plan to pieces.
The problem is, these splurges and spending sprees are coping mechanisms typically. If you are in control of your finances, you will not have as much of a problem simply saying no when the urge to splurge arises.
Your vices are killing you. Not literally. Maybe literally. Obviously things like heavy drinking or smoking are bad for your health. But they’re also terrible for your budget. But it’s not just those things. What about your morning Starbucks habit? While Starbucks is great stock to have and to hold, contributing to their business is not financially savvy as a customer.
A $5 cup of coffee everyday could easily be supplanted by a $.30 cup made at home. Most of your vices are expendable or transferable. If you truly care about your budget, you can make the changes necessary to get rid of these vices that are holding you back from financial freedom.
5. No Emergency Savings
Not having any emergency savings is the worst idea ever. You need to have a little bit of available cash on hand in case an issue arises. What if you get hit with an unexpected hospital bill or an HOA fine? You need to be able to pay for that without reaching into your debt pocketbook. If you have enough stashed away to cover some expenses, you’ll be able to weather the financial ups and downs of every month much more easily.
Research has shown that even just $500 in savings is enough to prevent the majority of financial mishaps for the typical American family. That is not a lot of money to acquire, but it will fix the majority of your liquidity issues. If you can devote yourself to setting aside $500, you can prevent a lot of headache the following months, and truly begin to live according to your budget.
Let’s be honest, budgets are hard. There’s no doubt about it. But we make them so much harder on ourselves than we need to. If we would take some simple steps to iron out our financial situation, we could make serious strides towards independence.
The first ideas touched on financial knowledge and being proactive. If you’re aware of your money and can keep yourself from missing payments, you’ll be better off. The next two are about self-control. Have some resolve and strength to start making the right decisions and you can really start on the path to financial freedom and diligence.
The final step is the most important, only because it deals with preparedness. If you take proper precautions and make sure to remain ahead of the curve with your budget and finances, you will be able to maintain your budget. It’s all about taking action and being ahead of the game. In the end, if you do those things, you’ll be on the path to a solid budget.