We all know that sticking to a budget is the best and easiest way to manage your personal financial affairs. But as someone, probably a wise accountant, once said: “The devil is in the details.” Which are the absolutely essential elements that will make that budget foolproof? How can you predict, or at least be prepared for, the unpredictable? And what will make you stay faithful to that spending plan come hell or high prices?
Smart budgeting tips to make your everyday accounting easier start with being alert to the well-known dangers that can befall anyone trying to follow a common budget.
The pitfalls of living on a budget
Buying on impulse is, in fact, probably the biggest danger to sound financial planning. They can be tiny transactions. But, if you add them up, over time they become a major outlay. Similar dangers to planning are posed when you become a victim of budget-busting social encounters. You’ve been on budget all week when you go out with friends to do something fun. But somebody in the crowd makes an impulsive — and expensive — choice of restaurants, entertainment or other destination. By the time the evening’s over you realize you’ve spent much more than expected because of social pressures.
Being undisciplined can certainly be a danger to your budget, but trouble also comes from the opposite extreme. Sometimes being too frugal about your money makes you miserable enough to rebel. That’s when a major spending binge can seem like just the emotional answer you’ve been looking for. Unfortunately, that binge is going to set you back far more than if you’d just lighten up a little. On occasion treat yourself and go for a minor splurge to give life some balance.
And you can’t always get the most value from your money by habitually doing things the cheapest way. Sometimes “least expensive” isn’t best way. Try listing the things that you value by order of importance and then compare your spending to your list. It’s a way to assure you’re getting what’s important out of life.
Awareness of the pitfalls of budgeting and access to tools that will help you budget properly will do little good without a third element. You must exercise the discipline to stick to your spending plan. That’s why smart budgeting tips should allow for easy budgeting.
1. Create an emergency fund
First and foremost, you must set up an emergency savings fund where you can set aside money for unexpected expenses. A major car breakdown will not be in most common budgets, but they are pretty common occurrences. Similarly, we don’t plan or budget for out-of-town travel to family funerals, or minor medical emergencies, or natural disasters, but they do happen.
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