If this spring has taught us anything, it’s that a solid plan—and backup plan—is an essential part of your financial toolkit. That doesn’t mean the unexpected won’t happen, but it does mean that it’s more important than ever to strengthen your financial wellbeing.
Taking some time to rethink and restructure your monthly budget is the first step toward a more sustainable and healthier situation, but creating a solid budget can be complicated. Here are five tips to help you avoid the common mistakes of budgeting.
Budgeting Tip #1: Budgeting Isn’t Just about Sticks—It’s Also about Carrots
The old saying about sticks and carrots reminds us of different motivation schemes, but one frequent problem of a budget occurs when they’re designed to be “all sticks” and no carrots. A budget is hard to follow if it feels like a punishment or a limitation.
Instead, plan for rewards within your budget—a date night, vacation, or wish-list purchase. These types of “carrots” in your budget can help motivate you to stay on track.
Budgeting Tip #2: It’s Your Budget—Not Someone Else’s
There’s a ton of models for different budgets, but before you simply adopt one, remember: you are unique, your budget should be too. Sure, take a model that you find as a starting point, but be sure to modify the model to match your wants, needs, values, and goals.
Budgeting Tip #3: Start with the Right Numbers—That Means Your Actual Income
One of the most rookie moves of budgeting is to start with the wrong number, but it’s an easy mistake to make. Be sure to start with your actual income: remember to subtract taxes, deductions, and similar automatic expenses. It’s best to start from actual, concrete information (such as your paystub) when planning a budget.
Budgeting Tip #4: Don’t forget to Save—Actually, Plan for It Like an Expense
Savings is often the last thing that appears in your budget—if it even appears as anything more than a “I’ll get to it later” item. Instead, one responsible thing that you can do is to plan a set amount to tuck away each month. Write it into your budget as if it were an expense, that way you’ll be sure to save up front rather than never getting to it later.
Budgeting Tip #5: Don’t Just Follow Your Balance—Follow Your Budget
Another mistake of budgeting involves follow-through. You create a budget, but instead of following it as the primary model, you let your account balance distract you. Of course, you should keep an eye on your account balances, but let your budget categories determine your spending guidelines. Just because you have more money in an account doesn’t mean you should forget the great budget you’ve created.
Keep on track with your categories and stick to your planned budget. It’s a healthier option for your financial wellbeing—and it’ll get you closer to your financial goals.
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