7 Ways You're Sabotaging Your Budget without Realizing It ...

Creating a budget is one of the best ways to avoid overspending. If you're trying to reach any type of financial goal, a budget points you in the right direction. But while spending plans are effective, you might be sabotaging your budget without realizing it.

1. Falsifying Your Income

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For a budget to be accurate, include correct numbers with regard to your income. Some people make the mistake of guessing or exaggerating their income. If you're serious about spending within limit, be perfectly honest about your income. Don't include overtime earnings in your budget since this money isn't guaranteed.

2. Omitting Some of Your Expenses

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Track your finances for a few weeks to get an idea of your expenses before creating a budget. For a budget to be accurate, it needs to include every expense you have from buying groceries to paying your mortgage.

3. Keeping Credit Cards in Your Wallet

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If you have a problem overspending, the last thing you need are credit cards in your wallet. To stick with your budget, keep your credit cards at home and bring cash – and only the cash you need for the day. Keeping extra cash in your wallet is a surefire way to bust your budget.

4. Failing to Monitor Your Budget

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It's important to review your budget every couple of days to make sure you're staying on track. This includes reviewing your bank accounts to check debit card transactions and bills that have cleared your account. This also provides an opportunity to tweak your budget if you forget to include an expense or if you have to spend unexpectedly outside your budget.

5. Not Rewarding Yourself

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Sticking with a budget is hard work, so don't feel guilty about rewarding yourself. It doesn't have to be an expensive reward. You can treat yourself to a movie or take yourself out to lunch. Budgets work better when you don't deprive yourself. Make sure you include recreation or entertainment in your budget so you can blow off steam and enjoy life. It might be $25 a week, or whatever amount you can afford to spend on yourself.

6. Having Unrealistic Expectations

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For a budget to work, it needs to be realistic. Understandably, you want to save as much as possible. But if your family normally spends $400 a month on groceries, it might be unrealistic to create a budget and only allocate $200 for groceries a month. In all likelihood, you're going to go over budget because your family requires more food items than a couple, a single person, or a family with fewer household members.

7. Not Budgeting for Incidentals

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Not only should you budget for entertainment or recreation, leave some wiggle room in your budget for incidentals or unexpected expenses that pop up. You might get invited to a wedding or baby shower and need to buy a gift, or you might have a home repair and need to pay a technician. Having wiggle room can reduce financial stress when costs occur outside your budget.

Creating a budget takes time and effort, but you can do it. Just make sure you're realistic with regard to your income and expenses. Also, check your budget periodically and make tweaks to keep everything on track. What are other tips for preparing a budget?

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