Category: Finance

Finance

9 Budgeting Mistakes Most People Dont Even Realize Theyre Making

“If you fail to plan, you plan to fail,” the saying goes. Well, budgeting is the equivalent of planning your finances.

We all like to think of ourselves as intelligent beings who know when to stop spending and save for the future, yet ask people how much is in their savings, or how much they spend on food every month, and most will give you a blank stare.

I should know. I’ve been there and I’ve talked to dozens of people in that position. Here are 9 of the most common mistakes I hear from them:

1. “Save As Much As Possible”

This is what most people believe. “Why budget?” they ask. “Just save as much as you can.” There are two problems with this approach:

First, you’ll deprive yourself of what you really want in life. Want to travel or learn a new language? “No,” you tell yourself. “I need to save money for the future.”

And second, because you’ve deprived yourself of these things, you’ll create an illusion that you’ve saved a lot. You’ll assume small or irregular expenses don’t matter. “So what if I bought a dress when I didn’t travel?” It’ll be fine if you only bought one dress, but because that dress is so insignificant, you forgot about it just 48 hours later.

Guess what you’re going to do the next time you see another dress you like? And thus the cycle of spending continues.

2. Contextless

Why does the cycle of spending continue despite the fact that we want to “save as much as possible”? Here’s why: there is no context to what you’re saving for.

So start with an end in mind (what are you saving for?), and then forecast into the future. At the end of each month, compare your progress to your forecast and look at the difference. Do you need to save more? Do you need to save less? Do you need to cut down a particular expense?

3. Wanting It All

Yes, you’ll probably have to cut something. Assuming that you can continue living as you do is one of the most common mistakes I see people make. Budgeting requires sacrifice, but there is good news…

4. All Expenses Created Equal

When you are deciding what to cut down on, consider the impact it will make on your life.

The fact that it costs a lot of money doesn’t mean you should immediately cut it out. Some people love their homes, so they spend more on rent, but cut down on food and other expenses – and they end up a lot happier than vice versa!

5. Assume Everything Will Work Out

It’s great to budget for what you’d love to do in the future, but make sure you also take emergencies into account.

The last thing you want is to save $5,000 for a major purchase, only to spend half of it fixing your car’s engine when it suddenly dies on you.

6. Going Solo

Coming up with a budget is easy. Sticking to it is the hard part. So if you want to maximize your chances of success, make sure you consult with the people around you – people like your spouse.

The more the people around you buy into your budget, the likelier you are to succeed.

7. Focusing on Technology

It’s almost inevitable that people would ask for my recommendation as to which software to use to budget. They will then go into procrastination mode while they compare all the available solutions out there. Here’s the truth: it doesn’t matter!

The point is to start easy and start immediately. Use pen and paper. And you can always upgrade later. The most important part is to change your mindset.

8. Taxes

This is especially true if you’re freelancing or working in your own business. In fact, it’s not uncommon for people to go bankrupt because they forgot to account for taxes – which depending on where you live, can go as high as 50% of your earnings!

9. Hope Budgeting Will Solve All Your Financial Woes

A financial guru once said that you can’t budget your way to wealth. How true it is!

If you’re earning $10,000 annually and you’re living in the U.S., no amount of budgeting will get you out of poverty. You have to make more money.

But that’s another conversation.

Education Finance

Student Savings Get Ready For School And Be A Frugal Student

Since summer will soon be coming to an end (sad to say but true), it’s time to start thinking of ways that you can cut back and get ready for school to begin! I myself am no longer a student, but when I was a student in college it was certainly expensive. If you’re able to go to a community college as opposed to a private university that certainly is helpful, but sometimes you end up getting an education where it best suits you and your preferred major.

Since books and many other supplies are SO expensive, it gets frustrating sometimes in regards to what to cut back on and when to splurge. As a student, things can especially get expensive so it’s up to you to hold on to your hat and do your best. Looking back I wish I would been a bit smarter in my decisions so that I could to cut back more. This would have been better as opposed to spending money on things I really didn’t need. When you’re a student this is when you should start socking away money (especially if you have a part time job) because after college you’ll certainly need it! But enough about the expenses of being a student and how I should have been better at saving my money, here are some ideas on how to save as a student. You can learn from my mistakes and my wise decisions too!

Ride a Bike Instead of a Car!

For the first couple of years in college I did not have a car and it saved me a lot of money. For one thing, gas is extremely expensive in California and another, cars cost a lot to take care of, especially if they are a lot older like mine was at the time. So instead of having a car, I got a bike. My bike unfortunately got vandalized, but up to that point it was fun to ride it around on campus and nearby! It saved me a ton of money that otherwise would have spent on gas and repairing my car expenses and it also gave me a lot of exercise, which was nice too. So if you’re considering taking your car across the states, think again because a bike is a much better alternative, at least while you’re getting used to a new school.

Invest in a Mini Fridge as Opposed to Cafeteria Food

Believe it or not but cafeteria food can actually cost more than investing in a small dorm room refrigerator. I remember having a cafeteria food plan and it cost a lot and I never used up my entire plan. I did have a refrigerator and looking back I wish I would have just stuck with that. You can plan healthier meals with a mini fridge and eat fresh fruit, turkey, bread, and other meats. Not to mention you can have delicious yogurt with fruit for a healthy breakfast! No, you usually can’t cook a gourmet meal in your dorm but the basics will take you far if you’re creative.

Stick with the Basics in Your Wardrobe Instead of Buying All New Clothinga

It’s fun to get all new clothing when you head off to school, isn’t it?! Whether you’re planning on buying new clothes for the first time or revamping your wardrobe for your Junior or Senior year, it may be tempting to start off with another new wardrobe. But, before you go on a major shopping spree, look through your closet first and reassess your apparel. You will definitely be able to use the basics and create many ensembles that will still look stylish.

For example, when you’re going to classes on a daily basis you’ll usually feel most comfortable in a favorite pair of jeans and a tee shirt. Add a floral jacket like in the picture above or another basic jacket that you already have in your wardrobe and you’ll be able to create multiple outfits with one or two main articles of clothing. Wondering what my personal favorite comfy apparel is that’s easy to mix and match? Miss Me jeans and Calvin Klein tee-shirts are what I love for long lasting comfort that’s also chic. Plus, Calvin Klein tee-shirts are extremely durable and trendy tees. Pair them with a belt and some playful pieces of jewelry (try Betsey Johnson for a fun college style), and you’ve got some wonderful everyday staples!

So when it’s time to head back to school (I know not yet, but it never hurts to plan ahead!), start thinking of ways that you can cut back. Some ways will be small and some ways will be big, but either way the little choices that you make will definitely help you save money over time. Start being a frugal student and you’ll have excellent results and save a lot of money for your future in the process.

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