Budgeting your money can be challenging, but the benefits are long term. It’s also a necessary aspect of personal finance management. There are many common budgeting mistakes that you may not even realize you’re making. Listed below are 10 common budget mistakes and easy ways to fix them!
1. Not writing your budget down
Budgeting is not a task that can be completed in your head. You will likely continue to overspend your money each month if your budget isn’t written down. It doesn’t matter how well you think you know your budget; there are going to be expenses or other aspects of your budget you could easily forget about.
Writing down your budget can help you see how you’re spending your money. This is a vital step in planning how you can reach your financial goals. Chances are, you will be more likely to stick to it when it’s written down. Create your first budget by using a basic template that will keep you on track.
2. Not tracking your spending
Some individuals are slack about tracking their spending habits. It’s essential to understand where your money is going, especially when trying to stick to a budget. You can make goals and wish lists, but without tracking where you are spending your money, your budget will be pointless.
An excellent place to start is by writing down what you have spent each day into separate spending categories. Whether it is a small purchase, such as buying a candy bar at work, or a large purchase, such as buying a new laptop, be in better control of your budget and finances by finding an easy way to watch your spending.
3. Setting unrealistic budgeting goals
Think realistically and budget your expenses to the best of your ability. Budgets are not one size fits all; your budget will be unique to your needs. Your friend may have fewer expenses than you, and that’s okay.
When creating your budget, make sure to build your budget around you. Be honest with your habits, and don’t create a budget that will cause you to be stretched too financially thin later. This will help you to stay on top of things and stick to your budget easily.
4. Forgetting to track one-time expenses
Your budget can quickly be in trouble if you forget to track one time expenses. Some examples could include birthday presents, haircuts, annual bills, home repairs, and vacations. This mistake can be easily avoided if you budget month to month and write down all unusual expenses on your calendar.
Consider using a small annual planner or monthly spreadsheet to track all of your expenses and their due dates. That way, you have all the financial aspects of your life kept in one place. It can also help keep track of when your bills are due.
5. Not planning for emergency expenses
It doesn’t matter if you think you have all expenses budgeted or not, if you forget emergency expenses, it can throw your budget for a major loop. Without the proper planning for these irregular expenses, there is a chance that you can add to your debt or get off track of your budget. Create an emergency fund so that you can have a safety net to take care of any unexpected expenses.
When creating an emergency fund, it’s recommended to save three to six months’ worth of living expenses. That way, in case you lose your job, have an unexpected home repair, or other emergencies, you can still financially support yourself. Start taking a small amount of your paycheck or checking account each month and transferring it into an emergency savings account.
6. Forgetting to plan for fun expenses
Having a budget doesn’t mean you have to compromise on fun. While fun can be spur of the moment, the expenses that come with it can be planned in advance. Consider building one or two fun days into your budget. That way, you can get away with friends for the day or weekend without feeling financially strained later.
This expense will be all about planning. Talk with your friends or significant other about the plans you want to budget for. When the time comes, you’ll know exactly how much you have available to spend.
7. Getting discouraged when your budget isn’t working
Even though it can be tough trying to stick to a strict budget, don’t get discouraged! Many individuals fail time and time again. Just make sure that you are being realistic and tracking your spending. This will help you to stick to a budget much easier than if you’re not following the rules.
Find ways to make budgeting fun. If you think of it as a chore, that’s all it’s ever going to be. Stick to your budget, no matter what, and if your new method isn’t working so well for you, ask a friend what method works for them. If you are struggling to find something that works for you, there are multiple budgeting apps out there that can help too!
8. Not reducing your expenses
Although it may not be easy at first, reducing expenses will be essential for making sure you stick to your budget. Think of all of the things that you spend money on each month; what expenses can be reduced or cut out completely? Keep in mind there are going to be fixed expenses such as housing or other bills that won’t be able to be reduced each month.
If you spend a fortune on food every month, try to find new ways to save money on groceries. It may not always work for individuals to increase their income to accommodate their extra spending. Therefore, find other ways that you can fix or improve the problem.
9. Not fixing your budgeting failures
If you find yourself constantly failing to make your budget work, take a step back and look at each problem. Are you overspending each month? Are you not adjusting your budget each month? Perhaps you just haven’t found a budgeting method that fits your lifestyle.
Focus on identifying then fixing any specific budgeting failures. Watch your overspending and be aware of common budgeting mistakes. It’s okay if you must start your budget from scratch a few times before getting it just right.
10. Not automating bill payments
An easy way to make sure you don’t miss a bill and stay on top of your budget is by automating all expenses where possible. The last thing that you want is a missed due date and a broken budget because you didn’t plan for late fees or other charges. Write down all of your bills, ranging from utilities to credit cards. Then, try to automate payments where you can.
Now you can easily stay on top of your budget without worrying about bills and focus more on additional spending and expenses. It may be helpful to include a spending plan in your budget. That way, you can determine what you should be spending each month.
For more budgeting tips check out 6 Tips for Budgeting Your Money in College!
For more mistakes to avoid, read Save Thousands By Avoiding These 7 Financial Mistakes.