So you’ve set a budget and it looks perfect on paper. You established different spending categories and set what seems like reasonable limits. Yet somehow it just doesn’t work out month after month.
Sound familiar? The first thing to do is double check that your budget is reasonable given factors like income and goals. But if everything looks set up for success, then ask yourself if any of these common financial habits are derailing your well-laid plans:
1. Impulse purchases
If you’re prone to buying items on a whim, this might be the secret reason that your budget is failing. Even if you just grab a magazine or pack of gum every time you’re standing in line at the check out counter, the costs add up. It’s an even bigger problem if you can’t walk into a store without buying everything that looks appealing, whether you need it or not.
2. Blurring the line between needs and wants
All budgets are loosely based on allotting your spending between needs (mortgage, bills) and wants (entertainment, eating out). In theory, the division between the two categories is clear. However, in the moment, the line can get blurry. For example, you might justify treating yourself to dinner at a restaurant because you had a hard day, even if the meal is going to exceed your "eating out” limits for the week or month. Remember, budgets don’t have to be a buzzkill. Allow yourself to make small adjustments here and there, but make sure everything adds up. If you spend more in one category, spend less in another.
3. Not tracking your spending
Unless you can remember every single purchase you make throughout a budget cycle, you should review your spending regularly. If it’s hard to work this task into your normal routine, set a schedule for yourself, e.g., every three days you spend two minutes looking at your checking account activity. (Pro tip: setting reminders on your phone is an easy way to make this a recurring event.) Whenever you see an expense you don’t remember or didn’t plan, make sure you add it to your total costs for the week, month, or whatever timeline you’ve set.
4. Failing to comparison shop
If you always take the first deal you find when shopping, you’re probably spending more than you have to. Next time do a little comparison shopping to see if there’s a better offer. This is especially true if you’re buying online. With the intense competition between online retailers, it’s always worth your time to look around for better prices.
5. You don’t automate your savings
Putting money into your savings account may be the most important part of your budget. However, if you transfer it manually, you may forget or avoid doing it because you’ve over-spent in other areas. The solution? Set up recurring transfers from your checking to your savings account through online banking. Designate a day (preferably soon after you get paid) and a pre-determined amount, and let technology do the rest. That way, you’ll always hit your savings goals every month.
