What you don’t need in your budget

Budgets ensure that you can afford your bills and
have enough money to live on, but no budget works
if you break it. Many people go over their personal
budgets from time to time, but routinely breaking the
budget can lead to debt, late payments, collection
calls or evictions.
Many people often find themselves in this position
in the middle of the month or as pay day
approaches. Yet, many of them fail to achieve their
goal. Before the month is half-spent, they have
abandoned their budgets.
Experts say this is largely as a result of poor
planning and mistakes made in drawing up a budget
and trying to implement it.
Some of the common mistakes you should note
when making a budget are:
Having unrealistic expectations
In drawing up a budget, it is important to know the
amount of money you are expecting or that will be
available to you. However, some people end up
listing their needs (and wants) and then thinking
about how they will get the money to meet them. By
doing so, they tend to overestimate their
expectations. While it is okay to be optimistic about
income or earnings, when it comes to budgeting, it
is important to be precise. This is because once
you draw up a budget based on expected earnings
of N100,000, for instance, and you end up with
N70,000, that budget is doomed.
Failure to document expenses
Many people do not keep track of their expenses.
They believe they can easily recall all the
expenditures they have made at the end of the day
or when they have the time. It is at the end of the
month that they realise their brain is not as powerful
as they thought. Surely, trying to recall every single
thing you spent money on in a month is impossible.
The best way to keep track of your expenses is to
document them as they happen. Make a habit of
keeping receipts, taking notes. When you go
shopping and you discover that the prices of some
of the things you bought are higher than they are in
your budget, it is important that you note those
changes.
According to experts, it is hard if not impossible to
properly implement your budget if you do not know
where your money is going. If you are too busy in
the day to note your expenses, they advise that you
find time to do so every night, updating your budget
to ensure that it reflects the actual expenses you
made.
Underestimating prices
Another mistake people make is that they make
their budgets based on assumptions as against
drawing up one based on current prices of items.
Because prices of items can fluctuate at short
intervals, it is not wise for you to make a budget
based on last month’s prices. This is more so when
it comes to food prices, especially seasonal food
items such as fruits, tomatoes and yams.
To avoid this mistake, experts advise that you try to
make it a habit to do market surveys or go window-
shopping. While you may consider this as time-
wasting, the truth is that in the long run, it can
prevent you from underestimating prices and save
your budget. If you make a budget and later
discover when you go shopping that you have
underestimated the prices, you may end up having
no money for important purchases or payments
later.
Being too prudent
According to experts, when you are too frugal with
your budget, you are likely to become frustrated
with it and abandon it all together. This is because it
is like a source of deprivation; an item that makes
you overly cautious and miserly. Of course, the idea
of a budget is to help you to keep expenses in
check and boost your savings, however, you must
take care that it does not choke you. To do that, you
have to keep a budget reasonable and give yourself
room for a ‘treat’ whenever applicable.
Planning for the short-term
Budgets are tools of financial planning. They are
meant to guide you in the execution of a financial
plan, which may span years and even decades. This
is why it is important that in drawing up your
budget, you keep the goal in focus. Planning with
just a month in focus may make you lose sight of
your goal. Remember, it is just not about surviving
financially for one month, it is about taking steps –
with each budget, that guides you to your ultimate
financial goal. If you have a rather large expenditure
to make at some point in the course of the year, it
is important that each of your budgets takes that
into consideration.
Not saving much
If your budget is not boosting your savings, it is a
sign that you are not getting it right. According to
experts, just as you budget for your transport to
work, so you should make a provision for savings
in your budgets. They stress that it is wrong to
assume that you wouldn’t save whatever is left of
your income after you have taken care of your
needs. But many people do not take note of this;
there is no provision for savings in their budgets.
Your budget is expected to include an amount
marked as savings. It could be anything from 10 per
cent of your income upwards. If you have difficulty
keeping to such a plan, you can overcome the
challenge by making arrangements for your bank to
deduct the money directly from your salary.
Spending more than you earn
This is perhaps the most common mistake people
make when it comes to budgeting. Their budget is
more than their earnings. Experts say this has to be
avoided or else financial freedom will be impossible.
The say the right thing to do is to ensure that your
budget is lesser than your income.
Ignoring ‘minor’ details
Many people leave many details out of their budgets
in the belief that they are too small. But these little
details or expenses that are left out can make you
fail in your attempt to implement the budget. This is
because when added up, they amount to much.
Some people even list the cost of recharging their
phones in this category, but many people will admit
that their phone bills run into thousands at the end
of the month – regardless of the fact that they
recharge their phones with ‘just’ N200 every now
and then. Oh, and that grilled meat that you buy
regularly, which is also not in your budget can cost
you thousands at the end of the month too. The fact
is that no expense is too small to be covered in
your budget.
Not planning for emergencies
This is considered one of the biggest mistakes
people make when it comes to budgeting. They
have no plan for unforeseen circumstances. They
only consider their needs. So, when they fall ill or
get involved in an accident or need to make a
sudden repair on their car, they become desperate,
sometimes, they are forced to borrow money.