Amidst the Covid-19 outbreak across the world, saving money has become all the more important now. No one knows what will happen next. No one knows what the economic condition will be after one month. Many companies are shut down for the time being, and it may have a negative impact on the economy in the long run.
Undoubtedly, budgeting can help you to save money and survive in an uncertain economy. It can help you track your expenses and protect your financial health against any kind of virus attack. So if you don’t have a budget, you need to create one immediately.
However, before you create a budget, it’s essential to know about the ways your budget can turn out to be a big disaster so that you don’t make those mistakes and waste money.
In this post, we will discuss when your budget can turn out to be a big disaster and how you can avoid it. Here you go.
1. If you have created a budget without considering the practical scenario
Suppose you set a household budget of $5000 but your income is $5200. Your budget is fantastic on paper but this is practically something unachievable. You have to live on a bare minimum to make your budget successful. While you may achieve this magical figure in the first month, it won’t be possible in all the months. And you’ll be frustrated. One extra expense is enough to break your budget.
How to avoid it
Set achievable goals for your budget, especially when you’re creating them for the first time. Calculate your normal expenses in a month and set a budget based on that. Calculate the amount you spend on impulsive purchases. Cut down those expenses from your budget like frequent dining out in an expensive restaurant or shopping recklessly.
If you can’t stop eating out, then find some other areas where you can cut down your expenses. For instance, you can opt for a basic Netflix plan or get a haircut done from a local hairstylist to save dollars.
2. When you don’t have an emergency fund
Your budget is bound to fail when you don’t have an emergency fund. Unforeseen expenses can arise due to sudden car repairs, home renovations, family emergencies, and so many other reasons. See – 7 Emergency Fund Examples You Should Prepare For
If you don’t set aside money for an emergency fund, then you may have to break your budget to survive a medical emergency. Even if you’re self-disciplined and stick to your budget every month, your financial plan may get sabotaged due to an unexpected expense.
How to avoid it
Set aside money for your emergency fund every month. Build a fat emergency fund for unforeseen expenses. You can even open a savings account where an amount will be deducted from your bank account on a particular day every month. This is the emergency fund that you can use to tackle financial emergencies.
3. If you don’t have good financial rapport with your spouse
If you don’t discuss your financial matters with your partner, then your budgeting can go haywire. Suppose you have created a budget and you’re spending money accordingly, but your spouse is happily shopping. If this continues in the long run, then it would be impossible to meet your budgeting goals.
How to avoid this
Have a clear discussion about both of your wants, goals, and needs. Ask about the things he/she can’t live without. You have to set your budget accordingly. If your spouse can’t live without a Netflix subscription, then you can at least cancel a newspaper subscription, which is not a necessity for both of you.
Sit together and decide who will take care of groceries and bill payments. If your spouse wants to shop for groceries, then let him/her know the amount allocated for this category. If he/she wants to pay bills, then make sure the job is done on time.
Share your financial goals and work hard toward them. Read financial articles on lifestyle ideas that help to save a lot. Determine the amount that both of you can spend individually. Set some ground rules for spending dollars. Be honest about your spending so that there is no miscommunication later.
It’s much easier to take precautionary steps and save your financial life in any economic situation when you know where you can slash your expenses. A good household budget can help to identify those areas.
Create a budget and make sure it doesn’t go wrong. Be self-disciplined and stick to the budget every month. Don’t give in to impulsive purchases. Evaluate your budget plan every month and readjust it if necessary based on your expenses. Your budget shouldn’t be too strict or too flexible. It should strike a healthy balance between the two.
Guest Post By: Linda Richardson
Linda Richardson is a financial content writer based in New Jersey and a perennial student with an ongoing interest in learning new things. She uses her curiosity, connected with knowledge as a financial writer, to write about a valuable lesson for small businesses. You can find her on Twitter at @LindaRossie9 and Facebook at @LindaRich008 She is currently a financial writer for http://www.CreditCardConsolidationDebt.com/