You would think that a former financial planner could put together an accurate budget. Unfortunately, the best-laid plans of mice and men often go awry. (This saying is in “To a Mouse” by Robert Burns)
No matter how careful I am in planning a budget, something may still go wrong. My central air conditioner failed last year even though it wasn’t that old. Plus, I didn’t realize that the life cycle of my stand up freezer is only 10 years and that hearing aids need to be replaced every 4 to 5 years. Replacing all these items was not in my budget and very expensive.
However, my emergency fund did cover other unexpected break downs like having to replace my old treadmill, workout television and to buy a new refrigerator. Needless to say, 2018 was a year of unforeseen expenses.
Projecting my retirement income for 2018 also missed it mark. Some of my Canadian dividend stocks cut their dividends which not only reduced their payouts but caused their share value to drop.
I offset some of my lost income by doing some tax loss selling which will generate an income tax refund in 2019. Plus my new hearing aids are tax-deductible which makes their purchase a little less painful.
Some tips to avoid budget failure
Don’t guess, there are plenty of ways to track your spending. (Internet banking, credit card statements, mobile apps just to name a few.
Don’t forget to include birthday, weddings and Christmas gifts in your budget. You can rack up credit card debt by unplanned gift giving, especially during the holidays.
Have a realistic emergency fund. Too many people live paycheck to paycheck. For example; the U.S. government shutdown is not only hurting government employees but contract workers who won’t get any back pay. One solution if you have trouble saving is a low-interest personal line of credit which is better than using your credit card for emergencies.
Your budget should be flexible, it isn’t written in stone. It isn’t something to keep you from spending money. A budget is a tool to provide you with information to manage your finances. It can help find money that you can spend where it will give you the most enjoyment.
- Think of a budget as a money road map. Sometimes you will come across bad weather, road closures and construction detours. Don’t give up if your budget doesn’t work out the way you planned.
It’s always a shame when you work hard and don’t get any benefit from the money that you have earned. Get in the habit of making a budget every year. Life is too short to live paycheck to paycheck.