The Main Challenges of Effective Budgeting

Budgeting effectively is not as easy as you would think. There are so many different types of bills and expenses that budgeting in today’s world currently leave us at a bit of a quandary in how to effectively manage all our bills. Most bills are due on different dates and then you have to worry about things outside your normal billing like property taxes if you own a home, book keeping if you’re a small business owner and numerous other items that could simply through your budget off track. You might have bi-annual car insurance payments but quarterly property taxes, your water bill might fall on different days from your credit card bill and both of them come out directly from your checking account but most other bills are charged to your credit cards. As a law-abiding tax paying citizen, it’s gotten more difficult to keep up with all the things you have to pay just in order to live. Moreover, due to inflation, it’s now more necessary than ever that you monitor the change in prices of the goods and services you receive as a consumer.

What Are the Main Challenges of Managing Multiple Credit Cards?

Depending on how many credit cards you concurrently carry and manage, one of the main challenges for many people is the process of keeping track of your accounts and their payments. If you have too many credit card accounts and too many statement due dates your financial situation can simply spiral out of control. For these consumers actively managing their debt and their accounts is definitely one of the main challenges associated with managing credit cards. If you have 10+ credit cards you have too many. You might not want to call and close out credit cards since doing so can have a negative impact to your credit worthiness but make sure you at least remove them from your wallet and shred them up. Otherwise, you can naturally wait for those cards to close out on their own due to inactivity (unless you’re getting charged fees, in which case it’s in your benefit to close out the accounts).

What Are Some of The Main Issues Associated with Direct Debits and Autopay

For many consumers, autopay and direct debits really add a lot of convenience to their budgeting woes and make their whole financial process a lot easier to digest. Autopay can help you never miss a bill payment. However, for those same consumers there is a tradeoff being made. If you take advantage of the convenience of direct debits and automatic payments for paying bills you are likely missing out on valuable financial information. When our bills get paid off automatically they help us stay course so that we don’t forget to make payments but they also remove much of the analytical parts of bill paying for many people. They keep things “out of mind and out of sight”. When payments are withdrawn automatically consumers are much more likely to avoid scrutinizing bills and statements and simply pay the amount. Less scrutiny means more chance for errors and this could hurt your pocket in the long run and lead you to miss catching billing mistakes.

Solution

There isn’t always a clear and effective solution but there are some ideas that can making managing bills easier. Creating a monthly budget can help take the guesswork out of when payments are due and help remove some of the gut instinct from bill keeping. Moreover, you should always look to separate bills based on their source of payment. For example, if you pay your utilities, water, taxes and internet bill directly from your checking account, you’ll know that there is where you’ll need to go to effectively manage those bills. If you use your credit card for paying nearly everything else you can use the same tactic and try to be more mindful of what you spend on groceries and other monthly expenses, etc. Separating things by the source of payment helps better organize your bills and expenses for when you need to pay them.