10 Common Budgeting Mistakes and How to Avoid Them

Have you ever blown your budget and thought, this just isn’t for me? Most of us have.
According to Debt.com, budgeting per household dropped from 70% in 2018 to 67% in 2019.

We’re not sure budgeting comes naturally for any of us. It may come easier for those who are a whiz at numbers and have a knack for being organized. Most often though, budgeting comes down to routine and discipline.

Even the best intentions, however, can have imperfections. Check out our list of 10 budgeting mistakes that threaten to derail your budgeting efforts.

Beginning Your Budget After the Month has Began

When it comes to budgeting, the “I’ll Start Tomorrow” philosophy will not work. To be successful, one must be prepared at the beginning of the month.

Take some time at the end of the previous month to review estimated expenses and make adjustments. Add in expenses related to special occasions, remove expenses that no longer apply and personalize your budget to the month at hand. 

Once you have your budget updated, kick-start the 1st with a celebratory sip of your favorite beverage ...budgeted for... of course.

Undercutting or Cushioning Monthly Costs

Simply put, this means guessing. It’s time to be real. Why? Because numbers don’t lie.

Estimating monthly costs will only work for the first three months you are budgeting. If you are just starting out, we recommend averaging 3 months of a fluctuating expense. For example, you may use more gas one month and less gas another month. Using an average will provide a stable amount and one that is dependable.

For bills that have large variances such as a your energy bill, we recommend looking at what was spent during the same time last year.

Not Accounting for Special Occasions

We'll agree that your partner’s birthday is a big deal. Even if they say it isn’t.

Plan for all notable dates - birthdays, anniversaries, the wedding that’s been on the calendar for six months and your niece’s Kindergarten graduation. We have separated Milestone Celebrations such as Quinsinettas and 50th Wedding Anniversary Parties, in a separate segment as they may require additional planning and expense. 

ProTip: Make a Master List of notable dates and transfer them to your monthly budget in preparation of the upcoming months.

Not Having a Rainy Day Fund

Life Happens. Things Come Up. Things Cost Money

Call it a Rainy Day Fund, an Emergency Fund or a Get-Out-Of-Jail-Free Fund, this is money that covers you when the universe throws you a curve-ball. It could be a fun curve ball like an unexpected canoe trip or it could be a less fabulous curve ball such as needing a new tire.

Regardless of the reason, a Rainy Day fund will provide the funds when you need them.

Forgetting About the Big, Once-A-Year Stuff

The holidays happen every year. Whether you celebrate Christmas, Hanukkah or Kwanzaa, you will spend more money in December. Probably a lot more.

Other annual expenses that may weaken the wallet include:

  • Homeowner Association Fees
  • Vehicle Registration Fees
  • Milestone Celebrations
  • Major Unknowns
  • Membership Fees 
  • Taxes
  • Medical Expenses
  • Insurance Premiums

Depending on your insurance, you may have an annual teeth cleaning expense or medical deductible to meet. On a happier note, a milestone celebration may allow travel to some place exotic for your parents’ 50th wedding anniversary!

For Major Unknowns, we recommend thinking about the age of your car. Are new brakes in your future? Other areas of consideration are expenses relating to kids. Are you planning to start a family? Is your tween headed towards orthodontics?

Not Separating Wants from Needs

You may like to have a new pair of jeans but you need to keep the lights on. What’s a person to do? The answer is to budget for both.

Food, shelter, electricity, heat and transportation are standard living expenses. Within these categories, there may be excess spending. It is a good idea to review spending on these items from time to time. Putting lights on a timer and carpooling can really help the pocketbook.

Discretionary spending includes categories such as clothing, entertainment, eating out, personal travel, etc. Tighter months may require cutting back on a few perks. Pack your lunch, cook at home and skipp the latte from that pricy coffee shop.

Distinguishing between wants and needs will help if you need to cut back.

Not Logging Spend

Don’t forget to track your spend! Carry a notebook, enter in your online notes or log onto little pieces of paper. We must formally note how we are spending money and then reconcile it with what has been budgeted.

A budget is an ongoing commitment and if we’re being honest, our memory isn’t going to serve us well. It’s best to get into the habit of recording what is spent so we can accurately manage our finances.

“You must gain control over your money or the lack of it will forever control you.”
Dave Ramsey

Overlooking Expenses

While you don’t get your oil-changed every month, you will get your oil changed as your mileage dictates. Be sure to build in recurring expenses that fall outside of the monthly timeline.

  • Oil Changes
  • Haircuts
  • Pest Control
  • Office Supplies

If you realize you have forgotten an expense, you can always build it into your budget. Missing an item here or there, won’t throw you terribly off track as long as you’ve budgeted properly.

Assuming Your Budget will Look the Same - Always

While our budgets may look similar month to month, it is unfair to assume your budget will never change. Before diving in at the beginning of the month, review your expenses and make any notable tweaks.

ProTip: Price Shop!

Take advantage of price shopping and removing excess spend. Trim the fat, so to speak. If you no longer watch the premium channels on your cable subscription, save some dollars and cancel them. Shop auto insurance carriers, grocery store ads, and watch for sales on commonly purchased items.

Not Making Room for the Fun Stuff

Meeting the guys for a drink or having Sunday brunch with the girls is a sanity must! Make sure to build some fun money into the equation.

It’s ok to splurge a little…or a lot…if you’ve planned for it. However, denying yourself some fun money can inevitably lead to a financial blowout.

In conclusion, we must remember that budgeting doesn’t have to be a bad word. B is for Budget, Not for Bad. Unless of course, you don’t have one.