6 Budgeting Mistakes You’re Making
By: Andrew Cartwright
Tags: Budgeting, Future, Savings, Emergency, Financial

Photo by Mathieu Stern on Unsplash

While budgeting ensures that we can make the most out of every dollar to save for the future, there are challenges that can cause many people to make mistakes or give up entirely. There are misconceptions that can derail your plan and set you further back in your goals.

Budgeting is a learning process where you can progress as you track your spending each month. Luckily, creating a budget is easier to do than before and there are many options available to you for different ways to budget. If you’re making these 6 budget mistakes, learn to avoid them for next month.

Not Tracking Your Spending

Of course one of the first mistakes to make is to not track your spending. Not tracking your spending can cause overspending and can risk you missing your financial goals for the month.

The problem may be that your spending plan may not work for you. “The key is to find an expense-tracking method that works for you, be it a spreadsheet, software, or old-fashioned pen and paper,” stated thebalance.com.

Not Budgeting For Fun

The point of budgeting isn’t to deprive yourself but rather to save for necessary funds like an emergency fund, a retirement plan, or a savings account. Meaning that if you don’t include a budget for your shopping splurges, weekend trips, or activities, your more likely to overspend.

Setting restrictions for yourself on a daily or monthly basis can make you accountable for when you do spend more. As long as you create a budget and stick to that realistic amount that you set for yourself, your less likely to mismanage your budget.

Not Having an Emergency Fund

As well as anticipating your fun activities, it also important to anticipate an emergency. While some people may start to budget for an emergency fund or for a savings account, not treating these funds like any other expenses, can set you back in your goals. An emergency fund helps to anticipate unexpected expenses that may come to your way such as a car repair, house maintenance, or medical expense.

Whatever that expense may be, establishing an emergency fund can help you in your personal savings so that you’re not struggling to find the money or stretching yourself thin for the next month. Opening a high yield savings account and making automatic payments into that account can help grow your emergency fund to prevent this mistake from happening.

Not Setting Realistic Expectations

Having realistic expectations when creating your budget is another misconception that can leave people avoiding budgeting in the first place. It is suggested that when beginning to budget to start off small and set honest steps for yourself.

You may be looking to improve your financial situation right away, but if your setting too high of a standard for yourself it may lead you to stray off your budget. Starting out slowly and leaving room for error, can make you more aware of where your habits lie to improve.

Rolling over your budget to the next month

Another mistake in budgeting that your probably making is rolling over your budget to the next month. Meaning you’re not treating each month separately from one another and your spending plan is the same for the next month.

There may be a dentist appointment, a friend’s birthday, or a coffee break you didn’t have planned for the month previous and risk overspending. While some payments or bills may be the same for each month, each month should have a different spending plan.

Not Calculating Every Expense

Another common budgeting mistake is not accounting for every expense. Maybe you forget to add that coffee that you once had with your coworkers or that take out that you ordered. “But without incorporating these costs into your spending plan, you risk having to dip into other budget categories (goodbye, streaming services) or falling short on other goals,” states Discover.

You should strive to update your budget if your spending isn’t accounted for so that you have an expectation of where you are each month. Some budgeting apps allow you to access all your financial accounts and will automatically place your expenses into categories that you set so that you don’t have to.

However, you decide to budget make sure that you avoid these common mistakes that people make when budgeting. Budgeting is a learning process that with the time you can slowly master. These mistakes have common fixes to them but not identifying them can lead you to think that budgeting may not be for you. There are many different ways to budget and you just have to learn what works for you in order to reach your financial goals.