If you’re like many Americans, you sit down every month and make a rough budget. You estimate how much money will be coming in, and you write down what you will do with that money.
Perhaps, like many Americans, when the end of the month comes, you find yourself looking at a negative number.
You didn’t spend excessively. You tried to stick to the budget. What happened? Why is it so hard to get ahead financially?
Did You Make This Budgeting Mistake?
For the last year or two, the above scenario has occurred in my family every month. We stuck to the budget; we didn’t spend excessively. What happened?
Simply put, we didn’t plan for recurring annual or semi-annual bills.
Well, we’re trying to pay down debt, and I wanted as much money as possible to go on our debt repayment. However, that left us short some months when we had large annual or semi-annual expenses like car insurance.
We were living with an unrealistic budget that didn’t really include all of our expenses.
If you’re having budgeting trouble, maybe you’re making that same mistake.
How to Fix Your Budget
If you’re creating a budget every month, you likely know what your monthly expenses are. Now, it’s time to sit down and write down your other expenses that aren’t monthly.
Consider renter’s or house insurance, car insurance, life insurance if you pay annually.
Don’t forget registration on your vehicle. Perhaps a yearly parking sticker?
Also, add in realistic expenses. For years now, there’s been a little Dave Ramsey in my head shouting “It’s not in the budget!”
I never included a clothing category because my mental little Dave would always shout, “It’s not in the budget!”
Well, guess what? My three kids keep growing, and whether or not the money is in the budget, they need clothes. I can certainly buy used for the family (and I do), and that helps cut costs, but I still need to set aside some money for clothes and shoes. But, I do try to search for coupons online each month. For example, there’s a ton of great Snapdeal coupons out there and we’ve used them several times to save a bundle of money.
Now, we have $50 a month set aside for clothing and shoes. We certainly don’t spend it every month, but we set the money aside and save it until we need it.
Don’t Forget to Set Aside Money for Savings
If you, too, are paying down debt, you may want to do as I did and set aside every extra penny for debt repayment. However, that’s not wise. What will happen is that some months you will make great progress on paying down your debt, and then other months you’ll have unexpected expenses that will plummet you into new debt if you don’t have ample savings.
Make sure you set aside some money every month for savings.
If you can only afford to set aside $5 a month, at least set aside that amount. If you can set aside $50 or more, great. But make saving a regular line item in your budget. You get used to being in the habit of saving, and your money will add up month in and month out if you have an emergency and need to dip into your savings.
If you create a realistic budget and consider ALL of your expenses, you’ll likely have much more success adhering to the budget.
I know a realistic budget will slow down our debt repayment speed, but my guess is that it will also ensure that we have steady debt reduction progress every month.