Are you getting punked by your fantasy frugal self?
You know, the person you imagine yourself becoming as you write your new budget in a fresh notebook, planning to save every spare cent you have, with no cash for fun?
That person doesn’t exist, nor should they, and it’s time to bid them farewell and get real about your budget.
You can have all of the apps, bank accounts and the best intentions you like, but it is unlikely you will stick to your budget if you don’t factor in money for fun every now and then.
It’s one of the most common money mistakes.
Financial adviser Nicola Beswick said rewarding yourself as you reach smaller milestones when working towards a large savings goal can help you stay mentally on track.
Budgeting is about finding a balance between focusing on your goal while also allowing yourself the freedom to spend from time to time so you don’t become discouraged.
“It can become a mindset game,” Ms Beswick said.
Here are six money mistakes to avoid if you want to stick to your budget.
No. 1: Not tracking spending
Ms Beswick said it was important to get a clear picture of your spending habits before designing your budget, so you know exactly how much you have to save.
“If you know where money is going after you have done that analysis and then redirect it, you are more likely to achieve the goal that you want to achieve rather than doing a budget but not actually looking at reality,” she said.
You can go old school and track your expenses with a pen and paper or use a mobile phone app such as Moneybrilliant or Goodbudget.
2. No play money
Trying to stick to a budget with no allowance for play money is akin to cutting sugar entirely from your diet – you might stick to it for a while but eventually you could end up eating a whole block of chocolate in one sitting.
A more sustainable way to budget is to allow yourself a set amount each pay cycle to spend on whatever you choose rather than depriving yourself entirely and splashing cash when you crack.
“You can get so sucked into trying to focus on a particular goal that it becomes very draconian and you get really frustrated,” Ms Beswick said.
“You find people tend to splurge if they don’t give themselves that flexibility.”
3. Underestimating expenses
There are certain expenses that people tend to commonly underestimate, Ms Beswick said.
Regular fluctuating expenses like utilities and petrol can be easy to get wrong, as well as irregular things like gifts, she said.
One way to avoid underestimating regular expenses, like gas and electricity, is to tally them up for a year, average them out and then add a buffer.
It’s also important to revisit your budget regularly, particularly when your circumstances change, such as getting a new job, losing work or having a baby.
4. No emergency fund
Ms Beswick said even if you are focused on aggressively paying down debt, you should have an emergency fund.
You’ll want three months of living expenses as a good guide, although what you need will depend on your individual circumstances.
If you don’t have an emergency fund, if something happens like your car needs major repairs or your hot water system breaks, that can set back your progress towards a savings goal or force you to take on debt that you can’t pay back quickly.
5. Being lazy
If you don’t shop around to get the best deal on utilities, insurance and your phone, or if the interest rate on your home loan still has a ‘3’ in front of it because you can’t face negotiating with your bank, then you are missing out on big savings.
The same goes if you haven’t cancelled subscriptions for things you don’t actually use like gym memberships or streaming services.
“It’s kind of like a lazy tax,” Ms Beswick said.
“You are paying for stuff because you’re either lazy or you’re too busy or you’ve put it in that too-hard basket.”
6. Not sharing goals
Ms Beswick said it’s important to share your goals with family and friends that you trust so they can help you stay on track when you’re tempted to blow your budget.
“Definitely you might be influenced to not stick to something if you’re surrounded by people that spend a lot,” she said.
“Your good friends … in some respects should be your cheer squad in terms of helping you work towards a particular goal.”