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6 ways you're probably screwing up your personal budget

6 ways you're probably screwing up your personal budget

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You don’t have to be a national politician to worry about a balanced budget. And if you’re living in fear of a rainy day, you’re not alone. According to Business Insider, half of Americans have less than one month’s income in savings. Make your financial plan work for you by avoiding some common budget-busting pitfalls.

Your budget is too strict

Your budget is a lot like a diet. Restrict yourself from everything but broccoli and chicken breasts and eventually — probably sooner than later — you’re sitting in bed eating an entire pan of brownies. According to Frugal Dad, super strict budgets not only create “money micro-managers,” but they also limit opportunities and can even cause tension in your relationships. Be realistic in your budget. Feeling deprived could make you do something you’ll regret with a certain American Express card.

You don’t account for irregular expenses

Your budget covers all the basics. You’ve accounted for your mortgage, your car payment, childcare, groceries, utilities and student loan payments. If you don’t include those irregular or unexpected expenses — like the auto repairs you can’t predict or the medical bills you never planned for. If you’re not sure how to build irregular expenses into your budget, just look to the past. Identify unforeseen expenses you incurred over the last several years. This will give you an idea of how much to include in the budget.

You’re automatically paying services you don’t use

Your Netflix subscription is only $7.99 per month and Spotify runs you about $10. Then there’s the gym membership you keep meaning to use and the car wash subscription that hasn’t kept you from driving a dirt-mobile. If you’re continually paying for services you don’t use because you can’t remember to cancel your subscription, now is the time to pick up the phone.

You’re paying interest

Member perks, frequent flyer miles, fraud protection… credit cards are beautiful things. That said, if you’re carrying a balance on those cards, you can consider the plastic your budget’s worst enemy. According to Time, the average American has nearly $5,000 in credit card debt. Paying the “minimum due” on that balance will take you 10 years to pay off – and you’ll end up spending more than $22,000 to do it.

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Shutterstock

You’re forgetting the little things

Your morning coffee only costs $4, but when morning coffee happens twice a day — every day — your yearly budget will have to survive a cool $2,920 worth of espresso. All expenses, even the small ones, like fast food, chewing gum and parking meters, add up quickly and can sabotage your budget if you’re not careful.

You’re budgeting for a life you can’t afford

Your budget might look beautiful on paper, but if you can’t back up the lifestyle you’re creating with a paycheck to match, you’ve failed before you’ve even begun. If you’re living beyond your means, talk to a financial advisor, who can help you get back on track. Keep in mind this could require you to make major lifestyle changes, like opting for an older car, finding a roommate or forgoing a yearly vacation. Just remember, you can’t buy the peace of mind that ultimately comes from being financially prepared.

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