Amanda Christensen, AFC
Utah Money Moms Editor; Extension Associate Professor
Well ladies, married or single, graduated or just starting your education, working your first job or years in to your career, it’s never too early or too late to start budgeting. Even if you’re already a ‘budget queen extraordinaire’, below are three common budget missteps to avoid.
Women are commonly the household money managers. Pandemic finances have made many feel like money matters are out of control. A budget gets us back to the basics and reminds us just how much we are in control of our financial health.
We’re also looking at even more stimulus money coming our way as well as an extension of the temporary suspension of student loan payments and interest accrual. So what you are doing with month-to-month spending right now is worth revisiting.
Common Mistake #1: Thinking budgeting is just setting limits on spending. Here’s what’s missing… tracking and categorizing purchases each month so that you see what you’re actually spending in each category. This must come before setting budget category limits. Then you can adjust those limits to support your financial values. Otherwise, it’s like taking a test without studying or committing to a workout routine without the right equipment. Budgets fail when you don’t track purchases, categorize them and revisit/adjust those budget totals.
Common Mistake #2: Not giving yourself (and your spouse/partner) a personal allowance. Financial autonomy is critical! Whether you’re in the “scrimp and save” stage of life or the “spending money flows freely” stage of life, it is equally important in both scenarios to practice self-discipline with personal spending. Set a limit and stick to it, don’t borrow into next month. Wondering how to determine what your personal allowance should be? Start with $5 (for those in “scrimp and save” mode). If you can afford a bit more, do the math on what 1% of your current take home pay is each month. That’s a good reference for how much both spouses/partners could be allotted as a personal allowance. Watch more here!
Common Mistake #3: Not adding an “investments” line item in your budget. Women live longer, are more likely to stop working mid-career, and earn less than their male counterparts. These facts, while not fun, are reality and make it critical that what we have is managed well because our margin for error is less. Again, you might ask, “How much income should be set aside for investments?” Financial professionals throw around 10% pretty freely. I’d advise people to look at their own individual situation and see for themselves. Something is better than nothing! You may crunch numbers and say, “Hey! I could do more than 10%!”
Expert Tip: Finding it tricky to communicate about the budget with your significant other? Try a budgeting app. Often times budget apps can help bridge the money gap between spouses/partners, helping both become equal participants in managing household finances. Now remember…there’s no one right way to budget! But if using an app helps keep neutral ground between the two of you (since the app is the one telling both of you to keep the spending in line, not each other) then dive right in!
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