You try to do the right thing. You create a financial plan and set up a budget to follow in your home budget software or budgeting spreadsheet. But it seems your budget still gets busted and it bugs the heck out of you! What keeps messing up your calculations?!? I’ll tell you what screws up your budget: L I F E.
L – Listed expenses get underestimated
I – Impulse buying
Every dollar is accounted for in your budget until you enter that store and walk out with something not budgeted. Oops. It happens to the best of us. But if you aren’t accounting for impulse purchases it’s going to throw off your budget. Either reign in your impulses or pad your budget by a bit for discretionary buys (stuff you buy when you want).
F – Forgotten bills
You thought you had all your expenses taken care of, then you get that department store credit card bill from the one time you used their card to get the extra bonus. Or you forgot to include your car insurance bill in your budget, which only comes twice a year. Or your drivers license is up for renewal after eight years (this one hit me recently). Be on the lookout for bills that are infrequent and make an effort to include them in your budget. Set up a reminder (like in Google Calendar) to include irregular bills if that helps.
E – Emergencies
You can’t plan for everything. Emergencies come up that eat into your budget. Make sure you have savings put away (emergency savings, yes?) so that you can cover the costs of emergencies. If you have to dip into credit you can find yourself paying off an emergency for months, if not years, to come.
LIFE, and life, will knock your budgets out of whack. Don’t let that discourage you from using a budget. A budget should be a fluid guideline that can change from month to month as your financial needs change. When you find yourself going over budget, make adjustments to future budgets and set up reminders for items that are irregular. As time goes on you will find that its easier to stay on budget.