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As you are working to make your credit cards work for you, create a working budget and save for the future, you need to carefully avoid some common mistakes. If you find that you are struggling with your budgeting goals, you may be guilty of one of these:
Not Planning for Future Expenses
We all have bills that we pay annually or quarterly instead of monthly. If you do not plan for these in your monthly budget, they are going to make a huge dent in your finances when they roll around. For instance, your auto insurance bill may be several hundred dollars that you pay yearly. If you are not setting money aside each month, you will struggle to find enough cash to pay that bill when it does come.
Besides bills that you know should come, you also need to plan for the inevitable but yet unexpected expenses. Your home’s washing machine, for instance, is not going to live forever. Neither will your vehicle. Which brings us to our next common mistake:
Failing to Create an Emergency Fund
If you are living without an emergency fund, you are living on a ticking time bomb. You will have an emergency at some point. When it comes, you really should not consider it unexpected. You know it is coming; it’s just a matter of time.
Emergencies can be small, like the need to make a major repair on your car, or they could be large, like suddenly needing to travel to the other side of the country for a loved one’s funeral. Regardless, they are expenses that you simply must pay, and without an emergency fund they will require you to go into debt.
Giving Yourself No Freedom
Many families fail to stick to a budget because they have no freedom. If you want to purchase a candy bar at the convenience store, you can’t because there is no budgetary category for these types of purchases. If you do not have some freedom built into the budget, you will not stick with it, unless you are extremely disciplined.
One way to avoid this problem is to give yourself an allowance every month. For instance, give each adult in your family $30 to spend however they want on a monthly basis. The amount will vary depending on the size of your budget, but the idea is that the spender can use this money however he or she wants, even if it is spent on a totally frivolous purchase like a candy bar or a trip to the cinema. The money can also be saved for large personal purchases that do not fit into the family budget. This freedom will make sticking to the budget much, much easier for everyone in the family. You might even want to consider giving your children a small allowance to stop the constant begging and whining for treats when you are shopping.
Budgeting and living a financially sound lifestyle takes commitment, but if you fall into one of these three mistakes, you are going to struggle to stay committed. If you find yourself in one of these categories, start from scratch with your budget. You will quickly see how a few small changes can turn your budgetary blunder into a working plan.
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Another common finance mistake is when parents allow their kids to freely use their credit cards. Teens end up spending on unnecessary stuff and sometimes prohibited items. There is a new tool for managing teens expenses. The new MYPLASH visa debit cards. View them at http://www.myplash.com/getacard.php
Comment by clevergirl — October 16, 2009 @ 12:59 pm