9 Common Budgeting Mistakes
Whether we like to admit it or not, we all know how important budgeting is when it comes to personal finance. There are many different methods and systems of budgeting, but they can all fall victim to these common mistakes. These mistakes can very easily ruin a budget, but they are usually simple fixes. Avoiding these 9 common mistakes, or taking some time to fix them, won’t make your budget perfect (because whose budget is perfect?!) but it will make your budget stronger and more effective.
Not having it in writing. It doesn’t matter whether you literally write it down or use some sort of spreadsheet, having a written budget is important. Inevitably when we attempt to commit all of our income and expenses to memory, we will forget something. It may be easy to remember the larger expenses, but the small things that tend to add up or the expenses that don’t occur everyday may slip through the cracks. Speaking of irregular expenses…
Forgetting about irregular expenses that may only occur annually or semi annually. You may want to budget out and save a portion of these expenses each pay period so that you don’t have to come up with all of the money at one time. This strategy works much better than waiting until the last minute. Even if you don’t need to save each month for these irregular expenses, you should still keep them on your radar so that you can add them into your budget when they roll around.
Not being consistent or updating your budget each month. If you’re like me and you are paid a salary and a good portion of your expenses are fixed, then your budget may not require much manipulation each month. However, you still have to account for those variable expenses, any increases in income by way of bonuses, side hustles etc., and any expenses that may be specific to a certain time period. If your income and expenses are different each month, then you definitely need to be going in and making updates regularly. Also keep in mind that it doesn’t matter how good your budgeting method is if you don’t remain consistent. No budget will work long term if you’re inconsistent!
Leaving things out. To get a clear picture of what you’re doing, what you need to do, and to be accurate, you need to include all of your income and expenses. The larger expenses are a given, but also do your best to include smaller expenses that tend to add up and can become budget busters. Budget for those things!
Not having a savings category. There may be some times when money is tight and you don’t think you’ll have enough to save. Try your best to save something anyway. If you can only save $5, do it! Always include savings in your budget so that you can build the habit. The amount can be altered each pay period if necessary.
Being too strict or limiting. If your budget is so strict that it’s making you miserable, you will not stick to it. Trust me. I’ve been there. It is very possible to be disciplined and intentional with your money and your budget without being overly strict.
Not having a “fun fund”. As I tell my clients, you’re going to spend that money anyway so you may as well budget for it. This also goes along with being too strict. There will be days when you’ll want to go out to eat or treat yourself or do #SelfCareSaturday. Include that in your budget. As long as your other obligations are taking care of, spend that money and don’t feel guilty about it. You planned for it, so enjoy it.
Not including some wiggle room. Sometimes your variable expenses may be more or less than you’d planned. Give yourself some wiggle room. You can’t (and won’t) always accurately estimate those expenses. To try to avoid completely blowing your budget, leave yourself a bit of wiggle room.
Making your budget too difficult or complex. If you want a budget with all of the bells and whistles, be my guest. From my experience, the more complex your budget then the more complicated and tedious it will be to update and maintain. Budgeting doesn’t have to be difficult or fancy. A simple budget will do just fine and it will be more convenient and easier for you to stick to.
Budgeting doesn’t have to be difficult or annoying. To make the most of it, find a method that you enjoy and avoid/fix these mistakes. Take some time to create a budget that works well for you, update and maintain it consistently, and enjoy the benefit that it adds to your overall financial plan.