Budgeting Mistakes - Mistakes You Are Making In Your Budget

It can be intimidating to even think of accounting for every penny you touch. However, you do not need a math degree to take care of your budget. With a little bit of instruction and practice, you can create a solid budget.

The biggest mistake you make is to not make a budget in the first place, especially at the unprecedented time we are in right now. In this article, we are going to tell you some of the most common and problematic budgeting errors people make, and how you can avoid making them. When you do have a budget, it is easier to be away from monetary blunders than when not having one.

   Failing to track your expenses: It is essential to be accurate in your budget if you want to make progress towards your financial goals. For this, it is important to track your spending. Failure to keep track of this will bring you one step close to failure. Most people do not stop to take stock of how much money a month they have wasted per month on frivolous things, such as fast food. They underestimate their expenses, and thus, at the end of the month they find they had overspent! What you need to do is to keep track of what you are spending, for at least one month before making a budget. Ideally, keep track of expenses each month.

   Neglecting retirement: This is more common than you think. People become so engrossed or busy in their day to day lives that they neglect their retirement, or rather planning for it. Here’s the thing though. The sooner you start saving for your retirement, the easier it shall be then the time to actually retire. It doesn’t matter whether you are a middle aged person or a teenager. Saving up for your retirement should be one of your biggest priorities. Most people think that saving for this is sacrificing money which they need at the present, but experts say that is doing it completely wrong! The money you save now will be paychecks after retirement. At a minimum, think about setting aside a part of your salary per month to meet your employer’s Provident Fund contributions. Make it a goal to save 15% of your income for your retirement.

   Not having an emergency fund: This is a major problem for many. A lot of people do not save for an emergency fund. When you have an emergency fund, there is no need to use your credit card to get fast cash at a huge interest rate. If, right now, you do not have an emergency fund, make sure to set aside a certain amount per month for this purpose.

 

Budgeting for Freelancers - Best 3 Tips to Budgeting for freelancers

Grass is always greener on the other side. While you are in a corporate job, the life of a freelancer may make you green with jealousy. After all, there is the talk of freelancers being masters of their own time, work, clients and money. They can work in their pajamas, and can even get to choose which clients they can work with. Sounds like a dream, right?

The reality is very different. Ask and freelancer about their financial situation and most of them will nod sadly to tell you that all is not well. There are frequently months where there is no income, and there are months where there is just an exhausting amount of work to do. This is the feast and famine cycle which many freelancers face.

And here is the problem with this feast and famine cycle. Let’s say that a freelancer is new to the business. He starts pitching and after a few weeks or months he gets a couple of clients. These are one-off gigs and are over soon. That means he needs to look for new clients again. In the beginning, he still has some capital to get him through the lean months, but when this feast and famine cycle keeps repeating, not only does he depletes his savings, but also his will to save.

When he does not have work, he keeps dreaming, thinking and planning to get gigs. And when work comes on his way and earns his pay, he spends it almost completely. This is because after periods of no work, he needs to give himself psychological satisfaction by spending. Due to this, freelancers find it harder to save up.

Everyone needs to budget. Same is with freelancers. However, for them budgeting is doubly hard due to irregular paychecks. To help you budget as a freelancer, here are some tips.

• Track the cash flow: When you are in a corporate job, you know exactly how much you’ll be getting and when you’ll be getting it. In freelancing, how much you make varies from one month to another and for some, payments are delayed frequently. For them, it is more of a guessing game. However, you can turn around the tables by tracking the money coming in from each of your transactions. Track things like the assignment itself, the date your client is invoiced, and when the invoice was paid. When you do this, you won’t lose money. Also, use a planner for taking care of your business and personal expenses.
• Set your financial priorities: For best results, use the 50/30/20 budget to allocate your income, even if it is irregular. According to this, you give 50% of your income on needs, 30% on your wants, and 20% on your investments and savings.
• Keep it simple: Don’t just start off big only to abandon your plan. Start small. Take baby steps when adopting any plan.

How to Factor Fixed Expenses into Your Budget - Budgetting

Everyone has expenses. It doesn’t matter if you are a manual laborer or a millionaire, everyone has income and expenses.

Now, you may wonder if all your expenses are the same. You think that at the end of the month a part of your money goes to meet all your expenses, and that all expenses are the same. However, that is not the case!

These can be divided into:

• Variable income
• Fixed income

Now, in a previous article, we have told you about Variable Expense. In this article, we shall tell you what are fixed expenses, and how to factor them into your budget.

What are Fixed Expenses?

These are expenses that occur regularly and do not change in their value. For instance, if one of your fixed expenses is Rs. 100, it won’t change to Rs. 200 next month. The variation happens in case of your Variable Expenses, which are unpredictable in nature.

Want to get some good examples of fixed expenses? These include insurance and mortgage payments, utility bills, and car insurance payments.

Fixed Expenses and Needs

Some people think that Fixed Expenses and Needs are synonymous. The thing is that not all fixed costs are your necessities. For instance, things like subscriptions and paid memberships are fixed expenses, but these are Wants, not Needs. You may be able to do without them.

Since these are by nature repeat costs, these are easy to budget for each and every month. You do not give much thought to these costs. These are easy to factor into any budget. Because of this nature, these expenses are easy to create an automatic bill payment schedule around.

Here’s how to track your fixed expenses

Fixed expenses have another advantage over variable costs: these are easier to spot on your balance sheet! Just one glance and you know which ones are recurring fixed costs. However, you may not know how much you are putting on these costs collectively, or if this amount actually fits into your budget or not.

For this, you need to track your spending. You can use a normal spreadsheet or even a free app if you want to keep track of things. You can even keep track of things by looking at your bank statement. There are many budgeting apps and some bank websites which break down your expenses. These also break down your transaction history by nature of the expenses.

With this done, you can add your fixed costs to see the total money you have to pay for fixed costs per month, and how much is left after that to tackle other expenses.

Some experts say that fixed costs need to be paid first. That being said, your budget should also have a place for Variable Expenses.

Save money by refining your budget

But how much of your income should you be spending on your Fixed Expenses? This depends on your comfort level and how you have classified them. But you still need to spend less than you earn. mymoneykarma advises you to adopt the 50/30/20 budget formula.

Things like rent which are your Needs should be allocated 50% of your monthly income. 30% of your wants should be allocated to meet your Needs. 20% are for debt payments and savings.

The name Fixed Expenses can be confusing to some. You may think that just because these are called fixed expenses there is no room to adjust things. The truth is that it is in your power to adjust a bit by negotiating prices and by exploring alternatives, but only in some cases. For example, you can save on car insurance, lower your cable bills, have lower power bills by consuming less electricity, and etc.

In case you are spending more than what is comfortable on fixed expenses, think about cancelling those services that you no longer need, or can do without in case money is a problem at present.

Budgeting Mistakes - Mistakes You Are Making In Your Budget

 The biggest mistake you make is to not make a budget in the first place, especially at the unprecedented time we are in right now. In this article, we are going to tell you some of the most common and problematic budgeting errors people make, and how you can avoid making them. When you do have a budget, it is easier to be away from monetary blunders than when not having one.

The biggest mistake you make is to not make a budget in the first place, especially at the unprecedented time we are in right now. In this article, we are going to tell you some of the most common and problematic budgeting errors people make, and how you can avoid making them. When you do have a budget, it is easier to be away from monetary blunders than when not having one.

Failing to track your expenses: It is essential to be accurate in your budget if you want to make progress towards your financial goals. For this, it is important to track your spending. Failure to keep track of this will bring you one step close to failure. Most people do not stop to take stock of how much money a month they have wasted per month on frivolous things, such as fast food. They underestimate their expenses, and thus, at the end of the month they find they had overspent! What you need to do is to keep track of what you are spending, for at least one month before making a budget. Ideally, keep track of expenses each month.

Neglecting retirement: This is more common than you think. People become so engrossed or busy in their day to day lives that they neglect their retirement, or rather planning for it. Here’s the thing though. The sooner you start saving for your retirement, the easier it shall be then the time to actually retire. It doesn’t matter whether you are a middle aged person or a teenager. Saving up for your retirement should be one of your biggest priorities. Most people think that saving for this is sacrificing money which they need at the present, but experts say that is doing it completely wrong! The money you save now will be paychecks after retirement. At a minimum, think about setting aside a part of your salary per month to meet your employer’s Provident Fund contributions. Make it a goal to save 15% of your income for your retirement.

Not having an emergency fund: This is a major problem for many. A lot of people do not save for an emergency fund. When you have an emergency fund, there is no need to use your credit card to get fast cash at a huge interest rate. If, right now, you do not have an emergency fund, make sure to set aside a certain amount per month for this purpose.

Make sure you are not making these mistakes. We at mymoneykarma are always here to help you out on your personal finance. It is essential to be accurate in your budget if you want to make progress towards your financial goals. For this, it is important to track your spending. Failure to keep track of this will bring you one step close to failure. Most people do not stop to take stock of how much money a month they have wasted per month on frivolous things, such as fast food. They underestimate their expenses, and thus, at the end of the month they find they had overspent! What you need to do is to keep track of what you are spending, for at least one month before making a budget. Ideally, keep track of expenses each month.

Neglecting retirement: This is more common than you think. People become so engrossed or busy in their day to day lives that they neglect their retirement, or rather planning for it. Here’s the thing though. The sooner you start saving for your retirement, the easier it shall be then the time to actually retire. It doesn’t matter whether you are a middle aged person or a teenager. Saving up for your retirement should be one of your biggest priorities. Most people think that saving for this is sacrificing money which they need at the present, but experts say that is doing it completely wrong! The money you save now will be paychecks after retirement. At a minimum, think about setting aside a part of your salary per month to meet your employer’s Provident Fund contributions. Make it a goal to save 15% of your income for your retirement.

    Not having an emergency fund: This is a major problem for many. A lot of people do not save for an emergency fund. When you have an emergency fund, there is no need to use your credit card to get fast cash at a huge interest rate. If, right now, you do not have an emergency fund, make sure to set aside a certain amount per month for this purpose.

Make sure you are not making these mistakes. We at mymoneykarma are always here to help you out on your personal finance.

50/30/20 budget - How Much Can You Spend Every Month?

 What you want is less money going out than coming in. In other words, your expenses need to be less than you’re your net income. Thus, before you think of buying something substantial, create a budget which takes care of your wants and needs.
How much should you spend?

When it comes down to your spending, it will be a good idea to use the 50/30/20 budget. When you use this formula, you can devote 50% of your net income to meeting needs like insurance and rent, 30% towards vacations and gym memberships, and 20% to things like savings and debt repayment. As you can see, your needs come before your wants, and what you spend always depends on how much you earn.
Start with your net income

At the end of each month, or at the beginning of the next month, you get your salary. It may look like a huge sum at first, but there is a limit to how much you can buy with it or do with it. That is why you need a budget. Now, start with your net income, which is your income after payroll deductions and post-tax deductions. The sum you arrive at now tells you how much you can afford to spend on things, from groceries to rent to gym membership.

But what if the money is not enough? Well, it won’t hurt to ask for a raise at work, get a promotion, change your job to one with a higher salary, or even take up part-time work in addition to your day job. If you want to cut back on current expenses, there are a few things you can do. For instance, you can do carpooling instead of using your own car each day. You can use coupons to bring down prices as well.
Pay the necessities first


If you spend on everything you like, you won’t have enough for the things you must have. For instance, you spend on an expensive gym membership and find you don’t have enough for rent. So here’s what you need to do. Start with giving 20% of your income towards meeting needs. Pay yourself first, and then set money for retirement and emergency funds. Once this is done, go to meet your debts. Have outstanding credit card debt? Tackle these next!

The next thing to do is to subtract all your regular bills. For instance, if your monthly net income is Rs. 50000, spend no more than 15000 on utilities, rent, food and the like.
Leave room for wants

A budget that caters to just needs may not be sustainable for the long run. You need to see your wants as well. That is why you may want to dedicate 30% of your income towards it.
Be flexible

Be flexible and open to options. Whether you are moving to a new city or whether the cost of living in your hometown has increased, it all depends on your income and expenses. If your expenses are high, do check your budget and spending habits.