Top 5 Budgeting Mistakes

1. Setting a budget that is too strict.

Setting a budget that will pay off your debt in 6 months is great and all, but did you leave any room for a little discretionary spending? Make sure you leave a little room for extra spending and some indulging here and there.

Far too often, those that restrict themselves too much financially, end up going on a shopping spree or simply over indulging. Allow yourself a little extra each month to prevent financial relapse.

The same concept should be applied to your grocery list as well. Make sure you write a list to keep yourself on task and ensure you stay in your budget, but remember, it’s okay to throw in an extra guilty pleasure, or two. After all, you did just do all the grocery shopping!
Fun Money is the money you set aside for ‘wants’ not ‘needs.’

2. Forgetting Occasions & Irregular Expenses

Nothing ever goes as planned, but when it does, don’t forget about it! Occasions such as Christmas and Easter can cost the average family a pretty penny. When factoring priorities into your budget, remember to allocate a nice chunk of change towards holidays and birthdays. It will be beneficial to also note any anniversaries that may be important to you, along with any babies or weddings that you may be part of in the upcoming year.

Also, don’t forget about the other irregular expenses. Have you gotten school supplies yet? What about summer utilities? Did you remember that your energy bills will be higher in the summer and winter?
It is crucial to take irregular expenses into consideration when creating your budget. Allow some cushion each month for those variable expenses such as utilities and phone bills, but also for the one-time events that may occur depending on the season. If you have children, you may also want to remember, the soccer cleats Billy wore last season will probably be too small this season.

3. Emergency Only Fund

The emergency fund is what’s going to save your budget when you need to cover for a medical emergency or car repair. DO NOT FORGET to allocate part of your monthly income towards an emergency fund.
The general rule of thumb is to have at least 6 months’ worth of expenses saved up in case of emergency or unexpected expenses. While 6 months is a lot of money to have stashed away for ‘just in case’ moments, it will be more helpful than you realize and some extra money is better than none. The long-term affect that unexpected situations can have on your bank account will be much less-severe if you already have at least some finances in line.

4. Subscription Costs

Sure, Netflix is only a small bit each month, but it adds up. Don’t forget to add paid monthly subscriptions to your budget. Do you listen to music? If so, what streaming app are you using and how much does it cost? Most music subscriptions cost anywhere between $7.99 and $14.99.

Also, while only a select few consider it entertainment, don’t forget about that gym membership you never use!

Smaller, easy to forget, recurring costs must be added to your monthly fixed expense list.

5. Don’t forget about Interest!

Assuming that you’ve already accounted for the larger bills such as car payments, mortgage and/or rent, it is important to consider interest. Interest has a HUGE impact on the actual costs associated with things. If interest rates on your bills or loans aren’t fixed or accounted for in the total cost, it is important to add them in.

If you’re in the market for an auto loan or new credit card, make sure to do some research. Living on a budget can be difficult, so don’t settle for the first credit card you get approved for. Different financial institutions, such as Missouri Central Credit Union, have competitive rates and offer incentives that may be appealing to you specifically.

Speak to a financial advisor at Missouri Central today to see what you types of loans and/or credit card you could be approved for.

A few other common mistakes you could be making while trying (or not trying) to budget may include:

  • Not writing your budget down
  • Not having a budget at all
  • Guessing monthly costs
  • Not having ‘fun money’
  • Forgetting the whole budget

Basically, if you don’t write your budget down, you might as well not have one.

Here’s some advice to leave you with; create GOALS for yourself.

Having an end goal is more affective when budgeting as it sets the stage for how well you’ll be willing to stick to your new budget. Start with smaller milestones that can help pave the way towards a bigger goal. It is important to set goals that are S.M.A.R.T.

  • Specific
  • Measurable
  • Achievable
  • Relevant
  • Time bound

Whether you’re saving up for a vacation or paying off a credit card, the end goal is your motivation and it is specific.

Be reasonable with your goals; set a goal that is measurable and meaningful.

Is the goal you have in mind achievable? Once you’ve determined your fixed expenses, savings, and emergency allocation, how much do you need to allocate to reach your goal?
Relevant, reasonable, and realistic goals are the keys to success. Don’t set yourself up for failure. Be reasonable with yourself so that you can achieve financial success.

Timing is everything. Give yourself as much time as you need, but set a date that will challenge you and keep you on your toes. Once you’ve completed one goal, move on to the next one.

Your Budget is Your Friend

Don’t forget that having your finances in line is FUN! Lifting the weight of financial stress from your shoulders can make all the difference. Being confident about what you can and cannot afford will allow you to make smarter financial decisions now and in the future. Get close with your budget and check in with it a few minutes each day to make sure you guys are still doing well!