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Budgeting has gained some popularity, with statistics indicating that 80% of people budget their expenses monthly. The downside, however, is that those who adopt personal budgeting are constantly faced with challenges caused by internal or external factors. Regardless of the challenges, they can be surmounted using the right strategies to improve your financial health. Some of the problems are discussed below.
- Unexpected expenses
If you have depended on a personal budget for a while, you may not be new to this challenge. Unexpected expenses may range from healthcare costs and job loss to a natural disaster like flooding. These costs can be expensive and burn a hole in your wallet or throw your plans out of order. For many people who have faced this situation, this adds extra financial pressure on an already existing burden. One vital lesson is that keeping a budget involves more than monitoring your monthly expenses. It takes a great deal of careful planning to cushion yourself when these unexpected expenses hit.
Ideally, financial experts advise also keeping three to six months of your monthly earnings in a safe account to take care of unexpected expenses. It would be risky to plan a budget and not make plans for emergencies that will likely arise within the year. According to statistics, only 35% of the population can immediately take care of a $2000 and above emergency expense. Reports indicate that the larger percentage may even struggle to pay for a $400 unexpected expense. This is a deeply concerning issue that can be avoided if you plan adequately. Undoubtedly, saving up to six months of your income takes great sacrifice. However, if you can do that, it can ease some pressure off you.
- The increasing cost of food prices
According to the USDA website, food prices in 2022 are 10.9% higher than in the same period in 2021. The hike in food prices has been a major concern for households and has significantly affected grocery shopping. This is a classic example of an external factor, and you have no direct control over it as an individual. When food prices increase, sticking to an already set budget becomes a challenge as something must give way.
Fortunately, it’s not all doom and gloom, especially when there are ways to decrease the financial burden on you and your family. It starts by reviewing your grocery shopping list and where to get what. Sometimes, you can make a significant difference by purchasing the cheapest foods you can find. This in no way means buying low-quality food products. On the contrary, the point here is to go grocery shopping with a renewed focus. You may also have to plan your meals before you go shopping. If you have the means, consider growing some of the staples on your grocery list.
- Increased credit card usage
According to statistics, over 90% of the population has access to a credit card, including those with personal budgets. While this is not bad, it becomes a problem when you over-rely on them. In 2018, Forbes conducted a survey to determine why people spend more when using credit cards. They discovered that consumers are often tempted to over-rely on their credit cards because of the convenience. Forbes indicated that this has contributed to the average individual credit card debt of $5,313.
In the long run, this leads to increased debts and keeps users financially drained. A possible solution is to consciously limit your credit card usage. Some people recommend leaving the credit card out of your wallets when leaving the house. If this option doesn’t work for you, it would be best to stick with another strategy that involves fully paying your credit card balance monthly. It would help if you also paid for things with cash rather than using your card since credit card debt is expensive.
- The increased cost of utility bills
According to a 2022 Bloomberg report, utility bills are likely to stay high due to challenges in the global sector. The Ukraine – Russia war has adversely affected global commodity prices, and the repercussions are immense. How does this affect you as an individual and, more importantly, your budget? Spending more money on energy and gas is how you feel the pinch. You have no choice but to keep adjusting your budget to accommodate rising utility bills. In this case, you may want to review your utility providers to see who offers the lowest rates. Sometimes, changing them makes a great difference.
