Nobody really teaches you much about financial management when you’re at school so it’s hard for young people when they leave home for the first time and start managing their own money. A lot of people don’t have a clue what they’re doing and end up in trouble pretty quickly. It’s difficult for young people to manage their money in the face of increasing living costs and slow growing wages and not being prepared properly makes things even harder. Most people have a general idea about good financial practices and they know that they need to have a monthly budget to make sure that they can cover all of their expenses. But if you don’t know what all of those expenses are, your budget is going to fall short. These are some of the monthly expenses that people often forget about when they’re managing their own money for the first time.
All of your monthly bills aren’t too difficult to keep on top of if you know exactly what you need to pay. They all come out of your bank account at the same time each month so after a couple of months, you should be on top of it. But a lot of people forget to account for financial emergencies. What if your car breaks down and you need to get it fixed right away or something in the house breaks and you need to pay to get it fixed? If you’re not prepared for those emergencies which can pop up at any time, you’re going to end up borrowing to cover the costs and then you’ve got large debts to deal with which is only going to make it harder to keep on top of your finances. That’s why you need to include a monthly payment into an emergency fund in your budget. It doesn’t have to be much, just whatever you can afford. It’ll come in handy in the future when you find yourself in a tricky situation.
Insurance is a monthly cost that a lot of people forget about but it’s important. You need to have contents insurance on your home in case you get broken into or there is a natural disaster like a fire or a flood. Otherwise, you’ll lose everything and it’ll be up to you to pay to replace everything. It’s also important to have proper car insurance so you’re not stuck paying for repairs after an accident or a breakdown. It doesn’t have to be a big expense as long as you search around for the best auto insurance companies and find one that offers a discount if you get your home insurance with them as well. It’s not a lot of money to pay each month but it can throw your budget off balance if you don’t account for it.
The biggest mistake you can make is not considering your taxes. Even if it’s months before you need to file a return and pay them, do you really want to pay it all in one go from a single month’s wages? If you do it that way, you’re going to fall short on all of your other bills. You need to be putting money aside each month which will cover your tax bill when it comes. Spreading the cost throughout the year will make it a lot easier to handle.
Make sure that you don’t forget these things when you’re writing your first budget.