More people than ever before are in debt, and it can be very difficult to get back on an even keel. If you’ve had money problems in the past, it can be hard to get credit in the future, and making money last until the next payday can be a challenge.
If you’re working to reduce the amount of money that you owe, it’s important to be aware of the budget busters which plague all of us. Remember, if your outgoings are greater than your incomings, you’re inevitably going to sink further into debt!
When it comes to sensible financial planning so you can get out of debt completely, coming up with a budget is essential. However, there can be some pitfalls to be aware of before you draw your budget up. Failure to acknowledge and accommodate for these will end up causing you further money problems in the future.
Optimism Is Good, But Don’t Be Too Optimistic
While you shouldn’t view your finances too negatively as this will just make you feel unhappy and dissatisfied with life the way it is, encouraging you to take out more credit to buy the things you lack, you shouldn’t be too optimistic either. Things usually cost a lot more than you anticipate that they’re going to, so always overestimate the amount you’re going to need to spend on any product and that way, you’ll avoid any nasty surprises.
Stay Kind To Yourself
Limitations are always necessary when drawing up a budget, but you still need to be kind to yourself otherwise you’ll never stick to it. Avoid being too strict with yourself. Give yourself a little leeway and plan in a few little treats – without them, you’ll end up borrowing more money in the end. Moderation is the key to an enjoyable life. However, when you’re buying little treats, don’t always go for the top of the range models. Something more affordable can be just as good without breaking the bank. For example, if you want a coffee grinder, you don’t need to go for a cutting edge electric one. If you get more details about the different models on the market, you’ll find out that a manual one works just as well at a fraction of the cost and is something that will give you lots of enjoyment.
Don’t Ignore The Occasional Expenses
When you’re creating a working budget for you and your family, it can be all too easy to forget about expenses which don’t recur each month. Vacations, car insurance and other occasional expenses may only happen once or twice per year, but they still crop up from time to time. Give yourself some extra money every month to cover those costs so you’re prepared when those expenses arise.
What Are The Essentials?
You need to determine what exactly is an absolute essential in your life and what you can live without. Things like cable TV might be nice to have, but you really don’t need it. Really, all we need in life is shelter, food and clothing. Yes, there are lots of other things which are nice to have, but we don’t need them to get by. While having a few treats is good to keep you feeling positive about your lifestyle, don’t go over the top with things you want but can’t afford.
Maintain Balanced Spending Ratios
A key part of any successful financial equation is knowing just how much you need to spend on every element of your budget. While everyone’s needs are different, these ratios can help to give you some idea of the amount of your total income you should be spending on each aspect of your lifestyle. For example, your housing costs which include your mortgage or rent, your taxes and insurance, any repairs and utilities should not exceed more than 33% of your income. After that, you should expect to spend around 15% on food, no more than 5% on clothes and around 15% on your car and its fuel and maintenance. Once you’ve paid for those essentials, it’s time to think about how much you’re going to save and how much you’re going to put towards paying off your debts. You should aim to save around 5% of your income and pay off an amount worth around another 5% every month. After that, your remaining money can be spent on entertainment, but remember to put some aside for extra expenses that you’re not expecting.