Every year you start off thinking ahead and telling yourself you are going to make a budget and stick to it this year. But, year and year again you find yourself in the same situation of over budget and in debt. Why?
First of all, there are many more budgeting items to consider when setting up your annual plan than most people realize. You remembered to itemize your utility bills, insurance and mortgage, but what about your nephew’s birthday? Each month there are hidden expenses that many forget such as credit card debt from the holidays carried over, Valentine’s Day gifts, taxes, spring break and summer vacations and back to school spending.
Tracking your finances and making a budget can be as simple or detailed as you need it to be. This is not a one size fits all kind of situation. You may be most comfortable with a simple pencil and paper system. Perhaps an excel worksheet is more your style. If you want a budget that is highly detailed a tracking software or website like mint.com might be best for you. Whatever you choose it is important to update and review your budget monthly.
Another commonly forgotten item is unexpected costs like replacing a dishwasher, fixing a windshield or an emergency room visit. But, how can you plan for the unexpected? Simple, you can set aside a little every month in an unexpected costs category to cover these costs. Somewhere between 5% and 10% of your monthly budget should cover most unexpected costs.
Once you have made your budget and remembered to itemize every possible cost, it is important to keep on track. We love saving money by finding great deals and discounts. You will feel good when you have money left over in a category at the end of the month. Today.com details ways that you can save money when budgeting for your family vacation. Today recommends searching the internet and also calling for specials and promotional rates. You do not need to pay retail price for anything.
Avoid these common mistakes and this year you can make a realistic budget that will help you achieve financial freedom.