You’ve gone through your bank statements and spending habits. You’ve vowed to cut costs.
Yet nothing changes and you’re just as broke as you were last year. Where are you going wrong?
It could be that you are making one of these common budgeting mistakes.
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Avoid These Common Budgeting Mistakes
No guilt here. I’ve been there. Most all of us have.
You commit to changing your ways so you don’t have to keep living paycheck-to-paycheck.
Yet month after month, year after year, your money situation doesn’t change.
Or, it gets worse.
Scour this list of some of the most common budgeting mistakes and see if one or more of them might be hindering your budgeting efforts.
Problem #1: Not Working Your Budget As A Team
If you are in a relationship, you’ll want to make sure you are on the same page for your budget to work.
When partners have differing attitudes about spending and saving, it can derail your budget!
That can lead to a real quicksand situation with your money as one or both partners spend as they please.
Sit down together once a month and make your budget for the following month.
Decide where the money will go so that you’re both in agreement. Designate who will pay the bills or whether you’ll do it together.
And don’t forget to add a category for “fun money” for each of you.
This is a set amount of money each of you gets per month to spend as you please.
Having a “fun money” category can help you avoid most of the fights about money and how you manage it.
RELATED: 4 TIPS TO STOP FIGHTING ABOUT MONEY
Problem #2: Forgetting To Set Goals
Do you have a plan for your money? Goals for what you want it to accomplish?
When you don’t tell your money where to go, you may find it disappearing right under your nose.
Setting financial goals will help you (as Dave Ramsey says) better be able to give every dollar a job.
When you give your dollars a place to go, whether it’s toward expenses or toward financial goals, you’ll find less waste in your budget.
Make sure your budget has specific goals for saving and getting out of debt.
These goals should be included as line items in your budget so they don’t get missed from month to month.
Treat them as you would any other monthly bill.
RELATED: SETTING FINANCIAL GOALS
Problem #3: Caring What Others Think
Trying to keep up with the Joneses can be a real hindrance to your budget.
And social media doesn’t make it any easier to live within your budget. Tropical vacations. New car. Professional family photos.
These updates from our friends can trigger the desire to have what they have, to do what they are doing.
Even if you feel secure in your finances, you can quickly feel defeated when you see what everyone else is doing.
This feeling of insecurity can lead to making purchases you really don’t want or need. And those purchases can be a real budget killer.
KNOW. YOUR. WHY.
In other words, know what your financial goals are and why they are important to YOU.
Then, ask yourself questions when you’re tempted to stray from your budget.
Questions such as:
- Do I really need this purchase?
- Is having this item or experience more important than our financial goals?
- Will I regret this purchase later?
- How many hours would I have to work to pay for this purchase?
Facing the time vs. money reality about a purchase can really make you re-think expenditures.
Another tip is to imagine how you will feel when you achieve your financial goals.
For instance, how will you feel when you’re debt free because you stuck to your budget?
I would imagine that all of those sacrifices you’ve made will be well worth it.
Keep your financial goals at the front of your mind.
And know that those spending temptations are simply noise getting in the way of your goals.
RELATED: ARE YOUR FRIENDS MAKING YOU BROKE?
Problem #4: Setting Unrealistic Expectations
This was a huge budgeting mistake for me when I first started budgeting.
I allotted $600 per month for groceries when $800 was more realistic.
And I made the same mistake of underestimating in other categories, such as transportation expenditures and eating out.
If you typically spend $400 a month on groceries, setting a $200 grocery budget is unrealistic and you’re setting yourself up for failure.
And you’re just going to end up frustrated. Yes, you could force yourself to stick within your budget.
And maybe there is a need to buckle down a bit in some categories.
However, it’s also important to be aware of where you’re being unrealistic.
Take a close look at your spending habits in each category.
Be honest and consider where some discipline may be needed in spending areas.
In addition, be realistic. If part of your plan is cutting back on certain expenses, consider cutting back gradually.
At the same time, acknowledge the fact that some categories may need to have higher allotments and that there’s no realistic way around that.
Problem #5: Forgetting Random Expenses
There’s plenty of expenses that pop up that we tend to forget about: birthdays (and parties), car registration, and veterinary expenses are just a few examples.
Another random expense might come in the area of bills that are quarterly or annually.
The problem is that there will always be something that can pop up and ruin your budget for the month.
You can’t get around that, and you’re not a machine that has the capability to remember every single unexpected expense.
Include categories such as gifts and vet bills in your monthly budget.
As the months go on, keep a mental note of unexpected expenses and consider adding even more categories to your budget.
For instance, annual car insurance premiums could be divided by 12 and added to your monthly budget too.
In addition, estimate other expenses such as car or home repair, and add a monthly amount to your budget for those categories as well.
However, you may want to include a “Miscellaneous” category in your budget as well.
Your miscellaneous category can be a catch-all for any unexpected expenses you may have missed.
RELATED: BUDGETING FOR UNEXPECTED EXPENSES
Problem #6: Making Your Budget Too Complicated
Your budget doesn’t have to take a rocket scientist to create or follow it.
In fact, the easier you make it to track your budget, the more likely you will actually do it.
Don’t make budgeting so difficult. Make a list of your income sources and make a list of your expenses.
Subtract the expenses from the income and see what the difference is. If there’s a positive number, give those extra dollars a job.
If there’s a negative number, cut expenses or increase your income.
Then, follow the budget like it’s your boss.
Problem #7: Forgetting The Fun Stuff
If your budget is too strict, you’ll be less likely to stick with it. Don’t force yourself to live like a pauper until you’ve reached your goals.
Eliminating fun from your budget is a recipe for disaster.
In fact, it could lead to large unplanned expenditures if you get to the point where the lack of fun is driving you crazy.
Make sure to include something in every monthly budget.
If you like new clothes, then make sure your budget leaves a little room to make a new purchase.
If you like to go out to eat, make sure you have a dining out amount in your budget.
Plan for fun gatherings at your home or at a park, even if you don’t spend more than $20.
Think of your “fun” spending category as a reward for sticking to your budget.
Problem #8: Not Tracking Your Numbers
While it is important to create a budget, it is equally important to keep track of how you are doing on your budget.
Evaluating your progress will let you know what you’ve done well for the month and what you can improve in the next month.
As you’re making each month’s budget, include categories for tracking what you spend each month.
Similarly, track numbers that show how much progress you’re making toward financial goals.
Include line items for how you’re doing on debt payoff or for how you’re doing on ramping up that emergency fund.
Tracking your numbers will help ensure you’re sticking to your plan.
It’ll also help you to catch any detours from your goals early on.
If it takes some time to get your budget down, don’t beat yourself up.
Tweaking your budget until you find what works is a normal part of learning to manage money well.
Just be sure that you’re continually working to find the right fit for you.
And make sure you’re catching any off-track budgeting (and correcting it) quickly.
You got this!
Budgeting takes time and effort. And avoiding common budgeting mistakes can help you reach your financial goals sooner.
What are some budgeting mistakes you’ve experienced? How did you correct them?