The thought of accounting for every bit of money you touch can be intimidating and found some budgeting mistakes.
But, the biggest budgeting flubs don’t require a math degree to fix. With some instruction and resolve, anyone can build a budget.
Here are 3 budgeting mistakes and how to fix them.
1. Failing to Track Expenses
The accuracy of your budget and your ability to make progress toward financial goals depends on knowing what you’re spending. Being vague with these figures could set you up for failure.
Track what you spend for at least one month before setting your budget. Ideally, you’ll keep tracking expenses every month, but shoot for one month per quarter at a minimum. Use a good budgeting app to simplify the process.
2. Neglecting Your Retirement
A goal that’s many decades away is an easy goal to neglect. But whether you’re middle-aged with a family or fresh out of college, you need to save for retirement. Therefore, it should be the single biggest financial priority in your life.
At a minimum, set aside enough of your salary to meet any employer match for 401(k) contributions. If you don’t have a 401(k), set up an IRA and contribute what you can each month. The ultimate goal is to set aside at least 15% of your current income for your golden years.
3. Skipping the Emergency Fund
Your emergency fund eliminates the need for tapping credit cards or other loans when unexpected expenses happen.
If you have nothing set aside in case of emergency, make a $500 fund your first priority. Once that’s in place and you’re contributing regularly to your retirement, set manageable goals for your emergency fund, working up to saving three and then six months of living expenses.
If you have the time and energy, consider boosting your emergency fund with side gigs — just figure out how to make money in a way that fits your schedule.
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