Introduction
We all want to improve our personal finances and financial situation. But we all stuck in some place is called what do I do and how do I do? Not to worry, we have answer of these questions. Answer for the question “What to do” is we should make a habit of budgeting. Budgeting not only can save the money but also it helps to prevent us of overspending. We have answered the second question of how to do in this article.
We will talk in 2 sections. The first section will tell the “Budgeting challenges” we face in when we do Budgeting and second section will tell “How we can avoid those challenges”.
Budgeting Challenges
Whenever we try to do budgeting, we face many challenges. Let’s get to know these challenges in details.
Lack of measurement
Lack of measurement plays an important role in Budgeting Challenges. As soon as the salary comes, we start spending it directly. There is no planning, no record for how much money will go to which segment and when. We have unlimited needs & wants. We don’t even think about savings because all the money has been spent and the little that is left is kept for the whole month or for emergencies.
Unnecessary Expenses or Overspending
Knowingly or unknowingly, we incur a lot of expenses every month which either could be avoided or not necessary. Every month we end up overspending or making unnecessary expenses which led us in situation where we face challenges in budgeting. For example, when we go to the mall, we get excited when we see Buy 1 Get 1 free offer and we feel FOMO (Fear Of Missing Out). What we do? We buy it and this happens many times. We didn’t need that thing which we bought but still we spend unnecessarily, which brings us the money shortage. Now we can’t do the things we wanted to do before.
Lack of Organization
Lack of organization is also one of the reasons for not being able to stick on budgeting. Whenever we plan, we do not organize ourselves. We divide all the expenses. We make different sections but, unable to stick on them. We use second section money to fulfill first section activity and it goes all around unless all the money is spent. While spending this way, we end up getting confused and just keep wondering where the money has gone.
Unexpected Expenses
Unexpected Expenses also play an important role in Budgeting Challenges.Such expenses are everyone’s problem. Sudden guest or any health & medical condition make it worse. You can neither postpone nor avoid such expenses. Unexpected Expenses spoil our budget in such a way that it takes months to fix it. And the mental stress that occurs in between is on another level.
Lack of Income
The problem of most people in Budgeting Challenges is that their expenses are more than their income. There can be two reasons for this, first the income is really low and second, in order to improve their lifestyle, people spend a lot of their money on unnecessary things. We have talked about the challenges we face in Budgeting now we will talk about the solution that How can we avoid Budgeting Challenges.
How to Avoid Budgeting Challenges
Income Sources
First thing first, in order to avoid the budgeting challenges if we feel our income is low and we are not able to cut the expenses because all the expenses are necessary then we must focus on increasing our income. This option can give us peace of mind about the money and when we are calm we can focus on budgeting.
Focus
Focus on your expenses. Do it with discipline and try to reduce your online and offline trips. Use Cash whenever possible. Use less credit or debit card or any kind of online transactions.
Right Method
Budgeting challenges increase if you use the wrong method. There are many ways to do budgeting. It is important that you choose the right budgeting method for you. First write down your needs & wants and brainstorm which section needs how much money. Let me give you an example, there are a budgeting rule called 50-30-20 Rule. It says 50% of your income should be in needs, 30% in wants & 20% in savings. But what if your expenses doesn’t cover under 50%? Will you still follow it? Is this right method for you? The answer is “NO”. Likewise you need to understand your lifestyle first then choose the method.
Financial Goals
It is also very important to have financial goals to avoid the problem of not being able to budget. Make 3 category for your financial goal. First – Short Term, Second – Mid Term & Third – Long Term. Now put your goals in these sections. It will help you a lot to overcome budgeting challenges. Once you done listing now time to take action on it with discipline and determination.
Eating Outside
Nowadays Eating outside is a trend & this costs a lot of money. Sometimes it looks small portion of amount but these small holes are more dangerous than the big one. Small holes can sink the whole ship without any predictions. Therefore, eating outside habit should be avoided.
Emergency Fund
Unexpected expenses can burn your pocket which costs your mental peace along with money. Always try to avoid these expenses. Make a room for this section and put some amount in this. Some financial adviser says you must have 6 months expenses in your account.
Credit Card
Avoid using credit cards, even this provoke you by giving some discounts. It is because when you use credit card, you don’t feel you spent money, its like you transacted something which you didn’t own but when it comes in billing statement it pains so much. Some people live their life on credit card. When you don’t pay your credit card bill on time it damages your CIBIL. CIBIL is very important while you want any loan from bank in future. High CIBIL shows how trustworthy you are. So, use less credit cards to overcome Budgeting Challenges.
Conclusion
We have talked about the challenges you face while we do budgeting and then we talked about the solution you can use to avoid budgeting challenges. These solutions needs your discipline and strong determination. Once you have it in your characteristic budgeting will be so easy for you.
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