01 May 3 Exceptionally Costly Budget Mistakes to Avoid
Just like a diet, sticking to a budget is sometimes a lot easier said than done. When it comes to temptations (both food and financial), the plan that works well on paper can turn into a disaster in practice.
When that “must have” purse or new outfit presents itself, your financial and personal goals seem to evaporate into thin air. However, that doesn’t mean you have to continuously fall prey to the same budget mistakes.
Just as you wouldn’t keep a jar of chocolate chip cookies in your house while dieting, you can take steps to remove financial temptations in your life and replace them with healthy habits.
Here are a few of those common and pricey budget mistakes to avoid, and what you should do instead:
The allure of “saving” money
One of the most insidious budget mistakes to avoid is being tricked by opportunities to “save” money. We’ve all encountered those deals that seem too good to be true, like 50% off a second pair of shoes, or sudden flight deals that shave off hundreds of dollars.
Don’t mistake saving money for falling prey to sneaky psychological marketing tricks. Stores like to create a sense of urgency and value with sales and deals – but the reality is that they’re lining their pockets while yours are getting lighter.
My solution, and your new one, is to pretend the sale/deal never existed, and just focus on the actual price. This removes the sense of urgency, and allows me to cool down and see if it fits in my budget. I’m amazed at how many times I’ll see shoes with a “one-time deal,” only to watch that price drop by half when next year’s line comes out.
Even if you’re being diligent and working towards your financial goals, life loves to throw curve balls your way, like sudden auto expenses. Financial emergencies can set even the most well-intentioned budget off the rails.
Everybody likes to think that emergencies only happen to “someone else,” until they come pounding at their front door with a hefty invoice. Accidents and surprises do happen, and the only way to keep your budget on track is to plan for these shifts in fortune with an emergency fund.
You’ll want to stow away at least 6 months’ worth of living expenses to ensure you don’t forgo your financial health and go into debt during a surprise. Better than a new pillow, this fund will let you sleep worry-free knowing that financial road bumps are already covered. Although 6+ months is ideal, any extra dollars go a long way during a rainy day.
Sneaky self-care needs
One of the most detrimental budget mistakes to avoid is to let self-care turn into self-sabotage. Putting your own health and well-being first is one thing, but busting your budget for self-care is an entirely different matter.
The whole purpose of self-care is to increase your calmness and happiness in life. When you break the bank for a manicure or spa-day, however, it has the exact opposite long-term effect. Sure, new nails might feel good for a few minutes, but they aren’t worth having credit card debt loom over your head.
Self-care isn’t a one-size-fits-all regimen. What works for many people won’t work for you, and that’s perfectly fine. It’s still possible to do little things for yourself to boost your self-esteem and confidence when you’re on a budget. For instance, going for a run has proven benefits for your happiness and well-being, and it’s a lot cheaper than a nail salon.
If you have any budget mistakes to avoid, share them with me on Twitter!
If you want to learn more about saving and investing, check out my firm LexION Capital.