How do you avoid overspending when you’re trying to save more money? The answer might surprise you!
Are you trying to save more money now? Most of us know that militant budgeting is a recipe for disaster. Holding yourself as accountable as a store or corporation is a lofty goal, but even the budget of a big box store isn’t broken down to the last dollar. Corporate accountants know it’s next-to-impossible to anticipate all of the expenses a business will incur during a month’s time. The same is true for your personal spending, so don’t hold yourself to impossible standards.
There’s no point in setting up your budget for failure. The key to a successful budget is having one you can use to control your spending over any length of time. The worst advice people receive makes that goal more difficult.
Avoid these common budget busters as you try to save money:
Worst Advice #1: Track every penny.
With a variety of apps available for budgeting, it’s technically possible to keep dibs on every dollar you spend. In order to do that, however, you’d have to be meticulous – nearly fanatical – with ensuring your spending was logged currently. Most people aren’t up to that task, but it’s easy enough to use these apps to get a rough estimate of where their money is going. It’s helpful because it doesn’t really matter if you go over your entertainment budget once during the year. It matters if every month you’re spending over half your income on entertainment – or housing, or any category in particular.
Worst Advice #2: Balance your books to zero.
Balancing your budget is really the point of making one to begin with, but the restrictions you place on yourself and your expected totals mean a lot to your overall success. Zero-sum budgeting is a popular new trend that’s bringing down a whole lot of couples. People who are excited to work at their financial goals are struggling to reach the sweet spot and feeling defeated when their books are off.
So, what is zero-sum budgeting and why is it a bad idea? It’s a super-restrictive form of money management encouraging people to plan every penny they spend in advance. In other words, it’s unreasonable, unrealistic and sets people up for failure. It’s also a wonderful challenge, but rare are the people who can make it work long-term.
Worst Advice #3: Cut up your credit cards.
To avoid needless spending and paying interest fees, some financial experts encourage people to forgo credit entirely. They coach you to cut up or freeze your cards, or worse, to close your credit accounts. These things may help you save money in the short term, but they will also limit your ability to borrow money in the event you really need it.
Your credit score takes many things into consideration, including the average length of your account history, the number of accounts you have, and more importantly, the amount of credit you have available. How much of that you use has a major impact on your credit score, so just closing one account can change things dramatically.
Instead, plan your purchases and use your cards wisely. For instance, if you currently have a car that doesn’t earn rewards or cash back, you can call your creditor and ask to have your card upgraded to a different type. This preserves your history while providing you with new benefits, and it won’t hurt your budget at all if you’re paying off your total before you’re charged interest.
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