Budgeting your money is an important part of managing your personal finances. When you set up your budget correctly and follow it closely, the benefits are long-term; however, budgeting isn’t always easy. Sometimes, it can even be discouraging if you don’t know what you are doing. Instead of wondering, “why am I so bad at budgeting?”, take the time to learn about money mistakes that you may not even realize you’re making. Listed below are 10 common budget mistakes to avoid and easy ways to fix them.
1. Not writing your budget down
Despite your best efforts, budgeting is not a task that can be completed in your head. It’s possible that you will overspend your money each month If your budget isn’t written down. Even if you think you know your budget well, there are going to be expenses or other aspects of your budget that might change or be forgotten.
Writing down your budget is an important component of reaching your financial goals. Whether you create your first budget with a budgeting template, online tool, or even on a napkin, creating a visual is the first step in a successful budget. Chances are, you will be more likely to stick to it when it’s written down.
2. Not tracking your spending
Some individuals struggle to track their spending habits. Noticing and directing where your money is going is essential when trying to stick to a budget. You can make financial 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, write it down. Watching your spending is the best way to gain more control of your budget and finances.
3. Setting unrealistic budgeting goals
Your budget is a tool to help you reach your goals, but the tool can only do what you tell it to. If you set your saving or expense limits too low, it may cause you to be stretched too financially thin later. Setting your goals too high can cause you to get discouraged with your budget. Think realistically and budget your expenses to the best of your ability.
When creating your budget, make sure to build your budget around you. Your friends may have fewer expenses than you, and that’s okay. Budgets are not one size fits all. Creating a budget that is unique to your needs 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 become inaccurate if you forget to track one-time expenses. Some examples could include birthday presents, haircuts, annual insurance payments, 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. Your calendar or planner can also help keep track of when your bills are due.
5. Not planning for emergency expenses
Even if you do a good job budgeting for all your regular expenses, if you don’t leave room for emergency expenses, it can throw your budget for a major loop. Without the proper planning for these unexpected expenses, there is a chance that you can add to your debt. Create an emergency fund so that you can have a safety net to take care of any irregular 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.
Completely eliminating fun will make you hate budgeting, which is not the goal. You can also try swapping out expensive outings with budget-friendly activities that can also ensure you’re still satisfying your social life and following your budget. 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
Budgets help you manage your debt and spending habits in the long term. If you haven’t noticed any changes in your finances, you likely haven’t given your budget enough time. 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.
You should 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 but adjust as necessary. If your new method isn’t working so well for you, ask a friend what method works for them. There are also budgeting apps available that can help make budgeting easier.
8. Not reducing your expenses
It may not always work for individuals to increase their income to accommodate their extra spending. Therefore, you can find other ways that you can fix or improve the problem. Although it may not be easy at first, reducing your variable 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? After you identify which parts of your budget you should spend less on, reduce or eliminate those categories completely. For example, if you spend a fortune on food every month, try to find new ways to save money on groceries. 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.
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 making adjustments to your budget each month? Do you know how much money you earn if you have multiple jobs or sources of income? Do you budget based on your wages before taxes rather than your take home pay? Perhaps you just haven’t found a budgeting method that fits your lifestyle.
Therefore, your budget needs to be realistic but also flexible. Focus on identifying the issues, and then fixing any specific budgeting failures. Watch your overspending and be aware of common budgeting mistakes. It’s okay if you have to 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 essential expenses wherever 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. When you take the stress of remembering to pay out of the picture, you also take away the possibility that you might forget to pay your bills.
You can start the automation process by writing down all of your bills, ranging from utilities to credit cards. Then, try to automate payments where you can. Most, if not all, of your bills can be switched to automatically withdraw from your bank account online. Although setting up automation is a great way to organize your finances, you may have to adjust from time to time as your expenses change.
You no longer have to wonder what the biggest budgeting mistakes are. Now, you can focus on tracking your income and expenses accurately, so you know exactly where your money is going. This is an important step to achieving your financial goals. It’s important to note that even if you fail your budget, you can always make adjustments to your spending plan and try again.
👛 Sticking to a realistic budget can be difficult. Check out 6 Budgeting Tips for College Students!
💰For more mistakes to avoid, read Save Thousands By Avoiding These 7 Financial Mistakes.