This material was prepared for Mike Roozeboom, LPL Financial Advisor, use.
Many families make sincere attempts to set a household budget to more successfully manage their personal finances. Unfortunately, often times these attempts fail.
If you feel like there’s always something that ruins your budget, you may be making one or more of these common budget busting mistakes:
Budget buster #1: You fail to plan for an emergency
In most instances, it’s the unexpected expenses that break a family budget. Financial emergencies can come in the form of a job loss, significant medical expenses, home or auto repairs or something you’ve never dreamed of. Having an emergency fund will help you weather these challenges. Make it a goal to build up cash reserves to cover between 3 and 6 months’ worth of living expenses for your emergency fund.
Budget buster #2: You fail to recognize your spending habits
Have you ever bought a pair of shoes to make yourself feel better? Many people shop as a hobby or spend money when they are feeling depressed or lonely. This is a sure-fire way to ruin your budget. If you find yourself spending money to meet some kind of other need, force yourself to pause before every purchase to determine whether you are buying the item out of need or another reason.
Budget buster #3: You fail to be a conscious consumer
It’s the little things that can often pile up and cause a lot of damage to your budget. For example – if you’re not aware of your cell phone provider’s rules for overage charges, you may have to end up paying a hefty fee. Take the time to truly understand the financial products you use, including your credit cards, bank products, retirement plan and others. Also, become a more conscious consumer – for example, if you’re purchasing an item that’s on sale, pay attention at the cash register to make sure you’re actually getting charged the sale price.
Budget buster #4: You fail to recognize your monthly expenditures
Most people can tell you how much their rent or mortgage is, and perhaps even their insurance costs, but they have no idea how much they are spending on groceries or utilities every month. Often times, money slips out of our fingers without us even noticing where it went. Track your monthly expenditures so you have a better handle on them and can set aside money for them. If your income won’t cover your monthly expenses, then it’s time to figure out how to decrease your expenses and increase your income.
Budget buster #5: You fail to take action
When it comes to money management, it’s critical that you don’t avoid addressing the situation you’re in. This is particularly important when you are dealing with debt or other major expenses. Frequently, people will feel ashamed of their situation and choose to simply ignore it. This will only make matters worse. If you are faced with a money issue, take action immediately. This will allow you to take control of the situation instead of letting the situation control you…and your budget.
Although sticking to a budget can be challenging at times, it’s an important tool for your family’s finances. A budget allows you to better see where your money is going –and where it needs to go. Most importantly – it will allow you to live your life the way you want and it will help you get there at lot faster!
Mike Roozeboom is a LPL Financial Advisor for MidWestOne Investment Services. He specializes in investments and retirement planning.
MidWestOne Bank and MidWestOne Investment Services are not registered broker/dealers and are not affiliated with LPL Financial.
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