Consumer Watch: Three major budget mistake
OKLAHOMA CITY (KOKH) —
From overdraft fees to late fees, Americans are collectively spending millions of dollars on unnecessary payments.
Avoiding these costly mistakes is possible with a solid budget. However, even people with a budget can make three major budgeting mistakes that could have a negative impact on their financial goals.
Major budgeting mistake number one:
- Not knowing your income. You might know how much you make a year, but that doesn't factor in taxes, which could cause problems in planning.
“Most people can actually tell you, ‘oh yes, I make let's say 500 dollars a week’, but they don't know the exact amount, so this starts their budget off with guessing how much income they bring, so then they guess how much goes out. It is a huge error that they are making,” says Tabatha Thurman, a financial education specialist with the Weokie Federal Credit Union.
Mistake number two:
- Giving up on your budget plan if a financial emergency happens. Instead use any savings you have built up for that emergency, and keep going. A solid budget will account for putting money into savings, and even if you have to use some or all of it for an unexpected emergency, you will continue contributing to it on you next pay check.
“We call it Budgeting 101, is making sure you pay yourself first. What that means is whatever you get paid or whatever your income is- is making sure you put some of that back immediately,” says Thurman.
Though it is important to pay all your bills and expenses, pushing your savings to the end will make it less likely that you'll actually do it. Saving a small percentage first will get you in the habit of living on what is left after you have paid yourself.
Mistake number three:
- It's all about attitude.
“If you go in saying, ‘I am living paycheck to paycheck, I don't have enough money to save, I don't even have enough money to budget.’ Then your budget is going to fail automatically,” says Thurman.
Saving is not just about your earning power. Families from every income level are living paycheck to paycheck, but breaking the habit is about creating a budget and sticking to it.
If you are trying a budget, and are feeling stressed-- keep at it. Financial education specialists say it can take some 90 days for you to feel confident in your new financial habits.