Budget Blindness | What is it and Why is it Dangerous?
When is the last time you updated your budget? I don’t mean tracking expenses. I’m talking about updating the categories on your budget? If you’re like most families, it has probably been a while. It is incredibly easy to overlook removing an old expense or to forget to add a new expense. I like to call this “budget blindness”. If you’re suffering from it, it can be extremely dangerous to your finances.
So what is budget blindness? Exactly what it sounds like. A lot of time we will prepare our budget and assume that we have the same expenses that we have always had. Unfortunately, life happens and those expenses can change from month to month without warning. When we are blind to those changes, they don’t get taken care of in our budgets.
So how is this dangerous? Let’s take a quick look.
Let’s assume that you add a $50.00/month bill to your budget, but don’t add it to your budget because of budget blindness. Of course, you’re going to pay it, but it’s not targeted. This means if your budget was already super tight, you aren’t sure where that money is coming from. You will have to skimp and save and maybe even sell something just to cover that $50.00. If you had made sure that you don’t have budget blindness, you would have added that expense from the start and built your budget knowing every single dime that was coming out.
Now let’s say you drop an expense, but forget to take it out of your budget. That same $50.00/month is not an unexpected windfall. Because you are thinking that you’re going to have to use it on a bill and don’t actually have to, you may not realize when you spend it on something else instead of saving it or using it to help pay down debt. Over the course of a year, that $50.00 could have saved you $600.00, but because you suffered from budget blindness, you missed out.
To avoid either of these situations from happening, make sure that you are looking at your budget every single month. Go over every expense that is in it and every income source. If you know what is there, the chances of being surprised by something are significantly less. If you no longer have to pay on an expense, remove it and assign that cash to another one or to savings. If you have added an expense, give enough room in your budget to cover it. Keeping your eyes wide open is the only surefire way to make sure that your budget is accurate every single month.
Have you ever suffered from budget blindness?