You know how it is: you create a budget, divide your income and at the end of the month you
realize that once again it didn't add up.
There are countless reasons for this, but there are 3 mistakes that 80% of people who
create a budget make and why they mainly fail.
In comparison, just 30% of Americans really manage to stick to their budget long term.
So what's the reason that one makes it and the other doesn't?
The truth lies in avoiding certain mistakes that keep you from sticking to your plan long
term.
So if you're someone who's always budgeting and failing, just starting out and wanting
to get it right from the start, or someone who wants to improve on their current budget
or not fall for the common mistakes, you've come to the right place.
Today we'll show you the 3 most common mistakes that keep you from sticking to your budget.
In addition, we will show you what you should focus on first and foremost in your budget
and at the end we will show you how to create a budget that guarantees success.
But before we get to the main topic of the video, first of all welcome back and if you
are new on our channel...
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from topics in saving money to investing!
And we know that many have difficulties with their finances and that is mainly due to lack
of financial education.
That's why we're working with BlinkIst, where you can increase your financial literacy with
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or in the pinned comment.
Before we start with the 3 mistakes, let's briefly talk about what should really be the
number 1 priority in your budget, especially because of the times we currently have and
how everything is currently developing.
Because who doesn't know it: You create your budget and ask yourself what is really important.
And we have times of high inflation, prices are rising more and more and many are now
not even really getting by on their income.
So you should ask yourself the question: What will this look like in my pension later?
I think many of you will now have images in your head that are perhaps not so positive
and a certain kind of fear spreads.
To prevent that, the number one thing in your budget should be your retirement savings.
As long as you don't have a huge pile of debt, retirement savings should be the number one
priority in your budget.
You may think to yourself that it should be logical, but in 2019, 25% of all working adults
didn't have any form of retirement savings set aside.
That's why I know the majority of the audience doesn't have retirement savings as a priority.
(Unless you've been diligently watching our videos and have implemented the tips.
Feel free to comment if you have ever implemented anything from our video).
There are 2 primary reasons why people do not prioritize Retirement Savings:
1.
it seems way too far away for them 2.
they actually think they can still work at 70.
.... honestly wonder who wants this voluntarily.
I'd rather see myself at 70 in a tilt-up couch on the beach sipping coconuts.
Back on topic, so if you go back to your budget after watching this video, check what priority
your Retirement Savings are or if they even show up.
I recommend you budget at least 10% of your salary and combine that with your investments
so that when you retire you have a portfolio with which you can enjoy your retirement.
Now let's take a look at the 3 mistakes that are keeping you from achieving success with
your budget.
First of all, it must be said that the 3 mistakes have nothing to do with the "technical" implementation
of your budget, but much more with your attitude and the circumstances.
Because what really keeps you from implementing your budget?
1.
very important: you have no goal, no vision, no WHY!
You lack the clarity of why you actually want to implement your budget.
Why do you want to implement your budget exactly as you have set it up?
The very first step should always be before you create a budget to clarify your why.
Do you want to retire earlier?
Do you want to take more vacations with your family?
Do you want peace of mind without worrying about money?
Do you want to become a millionaire?
I think you got the point.
Once you do, your why and your goals will also serve as a guide to how you should budget.
Do you want to retire earlier?
Then you should budget more of your income as a percentage for investments.
Do you want to go on vacation with your family more?
Then it makes sense to plan more of your income for your wishes and even set up a separate
account for it.
So how do you find your why and your goals and how can you budget for them?
You only need 3 steps to do this: 1.
ask yourself what is really important to you and look into the future, what would fulfill
you?
Nobody can really answer this question for you, so as a small orientation ask yourself
3 more questions: Who do I want to be in the future, what do I want to do, what do I want
to have?
With these questions you will get closer to your dream.
2.
determine the exact financial sum for your wishful thinking.
Don't get fuzzy here, but be very specific about the amount you need.
If you want to retire at 50, you need to determine how much money you will need to retire at
50.
Work out your plan to reach this sum - your budget.
Clarify here also the question of time, i.e. when this sum should be reached.
The main point here is to take responsibility for your own actions and to get straight into
the concrete planning of your financial future.
Without these steps I guarantee that your budget will fail again and again and you will
never stick to it in the long run.
Let's go directly to the 2nd error, which also ties in with the 1st one.
2.
You are thinking toooo optimistic.
Everyone knows it, you create your budget full of euphoria, now finally get control
over your finances and you can change all of your financial habits overnight....
you feel like a superhero.
But also superhero-like fall in your estimates for what you really need, what you can invest
and save.
Most people fall into the trap of underestimating what they really spend per month and overestimating
what they can save and invest per month.
Also, many financial patterns have formed over the years that cannot be changed overnight.
How can you get around this?
By collecting data in advance about what you spend in the month and keeping a spending
journal.
A spending journal is no different than a spending tracker where you record EVERY expense
you make with the amount.
You do this for 3 months and you have enough data about what you spend in the month and
on what, can decide what you can really cut and see objectively what you just can not
cut.
From there you can go further and plan your budget with a proper assessment.
A rough guideline on how to allocate your money is discussed at the end of the video.
Now I'll show you the 3rd mistake, which is especially important for the couples among
you.
3.
you do not work in a team.
Many of you are certainly between 25-45 years old, the age when most people enter into relationships,
marry and have children.
If you are single, then you create your budget only on what is important to you and what
you want.
But now there are 2 of you and that's where the problems start, especially if you don't
communicate with each other.
In terms of your budget, that's a big problem if you're both not pulling together and don't
have the same financial goals, plus different financial behaviors.
A viewer of ours once told us that she tried everything possible to set up a budget for
the family, but couldn't get it done every month because her husband wasn't interested
and so they worked against each other rather than with each other.
Therefore, my advice, if you are a couple, you should also create a budget together and
find a common way.
That way you increase the chances enormously and It also brings more fun than working against
each other.
If you don't have a budget yet and you don't know how to divide your money or maybe you
are looking for more inspiration, we will show you a budget system that guarantees success
and you will know for sure that you are dividing your money well.
We got this money management system from our mentor and it has helped us tremendously.
Use it as an inspiration on how to divide your money and if you are looking for a way
to track your finances digitally: you can use our All in one personal finance tracking
sheet.
You can find the link to the free download in the video description or in the pinned
comment.
This is how the money management system works: 10% goes into the financial freedom account.
With the money on this account only investments in e.g. real estate or shares are made.
Another 10% for long-term savings for later expenses such as a car, travel or repairs.
10% for education and training such as books and seminars.
55% for necessities like clothes, food and drink, rent etc.
"If you can't live on 55%, simplify the lifestyle.
Wealthy people think long term."
10% for pleasures such as restaurant visits or wellness stays.
And 5% for donations, but only if you are debt free.
If you have debts, you should first use the 5% to pay off your debts.
Here you have an inspiration, how you can divide your budget.
If you use the money management system and avoid the 3 previously discussed mistakes,
then track your finances with our disciplined tracking sheet to see if you are on the right
track or not, you are guaranteed to reach your financial goals.
And to get full control over your finances you should avoid these habits that will keep
you poor!
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We hope to see you in the next video.