What are The Critical Flaws That Causes Most Budgets To Fail?
Budget is a word we all know. Everyone knows what a budget is, right? Yet how many of us really make and maintain a stable monthly budget? The truth is that most of us with intentions Let's start, but there are unexpected expenses and we stop our budget. Then we lose and go back to handling our finances and worry about having a lot of months left at the end of the money. However, If you are trying to budget regularly to pay off your debts or to start a savings and investment program, then it is important to develop a viable and realistic budget.
So what's the problem? Why do most of us fail in the simple task of budgeting so that we can live within our means? The simple truth is that most budgets do not work because they do not account for erroneous or variable costs. each one Knows how much their rent or mortgage is paid. After months it is the same amount. If your rent is $ 1,000 per month, it is no brainer. The same is true of many other fixed expenses, such as auto loans Payment, purchase of cable TV, insurance premium etc. It is easy to budget for these expenses because the amount does not change from one month to the next.
In addition to the exact cost of each month, there are several types of expenses that vary slightly from month to month, yet we have a very good idea of what we spend each month. This(A great example of this is our grocery bill. Most of us have a very clear picture of how much we spend each week in the supermarket. So, we can insert a realistic figure into the progress that is being made in our budget and far away(Can't live Quantity may be slightly up or down each month, but we generally know the extent to which we are dealing. Other examples in this category include telephone bills, utility bills and petrol (When prices are stable, ie).
The real culprit in the veiled budget is variable or erroneous expenses. How much will you spend on car repairs in the next 12 months? What about medical bills? Home care expenses? It seems that this kind of expense bill us The left has moved away from the field, and we have a budget. In a short time, we are using food money to cover a new set of our car tires and the whole budget is destroyed.
So what is the solution? There is no perfect answer to this problem. But we can get closer using the usual monthly average technique. Start by submitting a 12-month checkbook register, bank statement, and credit card statements. Write this (Or enter a spreadsheet) How much you spent each time on something you didn't have to spend. Divide these expenses into categories, such as auto, home care, clothes, etc. Don't try to break it too much. What you want? They are a handful of useful categories. Then list each of these expenses for a full 12 months under their respective category.
When you are working with this exercise, you should have an excellent estimate of your total annual costs for these variable costs. For example, if you add all the costs of repairing or maintaining an automobile for the year Yes, and if that number goes up to 200 1,200, divide by 12 to get an average result of dollar per month. When you auto-repair, you need your monthly budget to prepare enough reserves to handle it How much permission do I need? Again, this method is not perfect, as there may be a cost that may be much higher than you estimate, but at least it simply ignores auto maintenance in your budget Understand that guessing, or worse, is close to reality.
The trick is to set up a separate savings account to allocate these "additional" funds. We say "extra" $ 100 goes into the savings account for six months, and then you automatically repair 400 repair It happens. You withdraw money from your $ 600 savings that were deliberately designed for such expenses. That way, you're automatically sorting out amounts that have made you all sorts of irregularity over the past year To cover costs l.
Most people are amazed when they analyze 12 months of irregular spending, and it immediately becomes clear why their budget is always falling apart. Due to this technique, it is important to recognize that the "extra" amount is low That's really extra. If we think we've covered our bills, and there's some cash in burning a hole in our pocket, our tendency is to spend it on some fun. But if we knew There's really no cash left, because we haven't set aside the extra 100 needed to keep our car on the road yet, so we're less inclined to spend it on pizza, beer and movies.
Budgets can be successfully achieved through this monthly average technique, especially if we apply it permanently year after year. As we move forward, our understanding of real costs becomes clearer , And we are sometimes not surprised by unexpected expenses.
The best way to implement this approach is to set up a regular savings program, where the amount you are separating to cover irregular expenses is automatically deducted from your salary and your Savings are sent to the account. If this amount is deducted from your salary before you see it, you will be less tempted to skip this important part of the budget process, and you will be able to budget in the long run Will greatly increase the chances of working.
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