smart spending

5 critical items for any budget

Actual expenses
4 of 7

The reason a lot of budgets fail? A bad memory.

"Someone will sit down and do a budget with pencil and paper, going through a mental list" of expenses, says Barry Picker, CPA and Certified Financial Planner with Picker & Auerbach, CPAs, in New York City. "And invariably something shows up that throws the budget into disarray."

Instead, before you make a budget, go through your checkbook and bank statements for the past year, and see what you actually spent money on, he says. Go through credit card statements, too.

Even when people remember items, they might forget the true price. Dave Jones, president of the Association of Independent Consumer Credit Counseling Agencies, agrees. "I've never had a single person in history overestimate a budget," Jones says.

Consumers typically underestimate by between $350 and $1,200 per month, he says. Culprits include variable expenses such as utilities, lunches, snacks, cell phone and texting plans, and even less-than-monthly expenses such as insurance and repairs. Don't forget clothing. Apparel is especially a big issue for parents. "Children always outgrow clothes, especially shoes," Jones says. But most families forget to put allowances for clothes and shoes into their budgets.




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