July 22, 2020

Common Budget Mistakes You Should Avoid

Don’t let these mishaps mess up your financial goals!

Giving Up Too Soon

Creating the perfect budget is impossible. You will never make a budget that doesn’t need editing. As life changes, so should your budget. Giving up too soon will keep you from actually achieving your financial goals. Don’t give up when budgeting feels hard. Find what isn’t working and try again. Budgets aren’t made to rule your life, you make a budget to control your money. If your budget isn’t working, try a different budget style or check for the following mistakes.

Guessing Costs

When putting your budget together you can’t guess the amounts. Guessing takes away the reality of your budget. It also makes you overestimate or underestimate what you’re actually working with. If your usual grocery budget is $500 but you guessed it was $200 it’s no wonder you’re still hungry. Base your budget on actual numbers by tracking your spending. That way, you can shift your spending in small increments to prevent your budget from feeling too strict.

Unrealistic Sacrifices

When you first start budgeting, you may have high hopes of saving as much money as possible. These hopes might make you create unrealistic expectations. Don’t underestimate how much you need to maintain a healthy lifestyle. Budgeting half as much for something basic like groceries can be too hard to stick to when you’re not ready. Avoid drastic changes right away. Start by basing your numbers on current spending habits. Then shift the money toward your ideal budget as you get used to spending a little less in each area.

Not Budgeting for Fun

Most budgets that fail don’t make any room for fun. What happens when your coworkers ask you out for drinks or you feel like grabbing coffee before work? Not budgeting for casual coffee dates and nights out can catch you off guard and add up fast. Add a category called Fun or Entertainment and put in an amount a little less than you spend on average. That way you’ll have money for those moments when you need some spontaneity, but it won’t mess up your budget. Anything you don’t use in that category can roll over to the next month for a little extra fun.

Forgetting Irregular Expenses

It’s easy to create a budget for regular expenses, but what about those that happen only once or twice a year? Property taxes or car insurance can be easily forgotten when creating a budget. Not sure how to add them to your budget? Divide the total that you paid in the last year by 12 and put that amount aside every month. You’ll have enough at the end of the year instead of scrambling to put together a large sum when it’s due.

No Emergency Fund

Emergencies are never planned, but they do happen. Don’t let your budget fall apart when your car does. Put some money aside every month to cover that random trip to the ER or breakdowns. Being financially prepared for emergencies will prevent destroying your budget. You’ll be glad your bank account was ready for that unexpected bill from the hospital. All you have to do is refund it once you use it. It’s already in your budget, remember?

When you remove guesswork and add in a little fun you will feel more confident about your budget. Don’t let these mistakes keep you from reaching your goals. Revise your budget and keep going; it’s never too late to gain control of your finances and still have fun doing it. All you have to do is try again.