Creating and Managing Your Personal Budget, Part 5

Manage your budgets properlyCreating and Managing Your Personal Budget, Part 5            

Continued from “Creating and Managing Your Personal Budget, Part 4”

 

Avoiding Spending Pitfalls!

Now that you understand the benefits from personal budgeting, you can see why more and more people are using this system to manage and reduce their debts, whilst increasing their savings.

However, there are a number of areas where you need to be careful in order to maintain your budgeting.

Credit cards are one of the easiest ways to get into big debt very quickly. They have an unassuming quality of a cheap piece of plastic but, if used without care and attention, can wreak havoc with anyone’s spending plans. It is common for people to make unwise purchases, which they would have avoided otherwise, because they had the credit card in their wallet and it seemed like a good idea at the time!

The easiest solution is to minimise the use of credit cards to the essentials and emergencies only. Start using cash for most purchases as, if you can’t withdraw the cash from the machine, you can’t spend it! Keep your credit card away from your wallet or purse and it might just slow you down from using it.

Be patient. Changing engrained habits take time and you may have to adjust your budget a couple of times to suit your needs. Although you have set your financial goals, it takes time to achieve those goals properly, without jumping ship half way along. For example, an individual begins setting aside money on a regular basis for a new car with the best intentions of saving up the money and them making the purchase.

However, after a few months they discover the car of their dreams and rather than waiting until they have saved enough, they make the purchase.  This could put some serious financial strains on your finances, especially if other unforeseen or emergency bills suddenly come in.

Discipline is the key to preventing impatience from breaking your budget strategy.

Budgets need to be reviewed on a regular basis to see if they need to be adjusted for whatever reason. A lot of people make a budget and then don’t review it on a regular basis. This can have an impact n the effectiveness of the budget as they are susceptible to many external factors such as money in, money out, your changing needs, etc. If the budget is not reviewed regularly it could result in some major deficits which may have serious long term impacts on your finances.

Special items such as Christmas, birthdays, holidays, etc, must also be considered in the overall budgeting. These items can have a considerable impact on your finances and it is best to factor these in throughout the year to “spread-the-cost”. This will avoid peaks which may come as a surprise when you least want it.

As well as travel and accommodation for holidays, don’t forget money required for food, entertainment, and spending money. If you are going to a resort be sure to factor in the cost at a resort which will normally be higher than the costs you will pay locally.

With careful planning you will be surprised at how much money you can save without rearly noticing it. Once you can see that it is benefiting your finances, it will give you a further incentive to save more.

Continued in the final part of “Creating and Managing Your Personal Budget, Part 6”

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