So, you decided to start budgeting for the first time. You have printed off the Basic Budget Setup Forms, thrown this thing together and you are ready to roll! Here’s the thing, I can guarantee you are going to mess this up, like immediately. Before you get started, let me tell you the 10 budgeting mistakes beginners make.
If you make these mistakes (and it is okay if you do!), here is what your first month of budgeting will probably look like.
It’s the first of the month, your first attempt at budgeting and the first day of your new financial life. You are motivated, excited and driven. Just like any new venture, there is always the beginning where you are so focused, everything is so shiny and new, you can’t imagine anything keeping you from what you want to accomplish.
Flash forward to the 15th of the month. You ate out more this month than you had planned on because your schedule got busy, you bought a new shirt for the last minute event that came up, and your gas expenses ended up being way more than what you thought they were. You haven’t even looked at your budget, but you know you messed it up big time.
What’s the point of even trying to stay on budget now? You should probably just scrap it and try again next month. Right?
Okay, okay, you get it. This is usually what happens to people when they start budgeting for the first month. I am here to tell you, we have all been here. Budgeting is a constant work in progress and it took my husband and me about 3-6 months to figure out our budget.
Mistakes will happen for sure, but what you do after those mistakes will determine if you are going to be successful or not. As long as you keep going and keep trying, this will work for you.
Mistake #1: Having unrealistic expectations.
Budgeting is not this instant thing where you fill out the paper budget sheet and magically all of your spendings comply. It is a complete behavior change. You are going to work on changing your spending behaviors. That is hard!!
Don’t set unrealistic expectations for yourself because you will fail. Then you will give up completely because you will feel worthless. If you have been eating out 24/7 (and have spent $600/month doing so), you should probably make your first month’s budget $400 for eating out. Then the following month, shoot for $250, and so on.
It would be completely crazy to expect yourself to become a different person from one day to the next. If you are a spender (which I totally am), you are not going to be a super frugal person the day you start budgeting. You haven’t trained yourself to be that way.
Setting up unrealistic expectations will cause you to fail and quit. Make small adjustments over time that you can win with.
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Mistake #2: Expecting results without putting in any effort.
Your budget is all filled out, it’s hanging on the fridge, you go about your life and at the end of the month, you didn’t stay on budget. Why?
Umm, duh. You completely ignored your budget all month. You have to be an active participant in the process to know if you are sticking with your budget or not. These are not magical numbers on your budget forms that will keep your spending in check.
All month (I do this once weekly, but in the beginning, it was almost daily) you should be tracking your spending penny-by-penny to make sure you know which category you are spending from, how much is left, if you went over, etc. You truly may have to be a bit obsessive in the beginning when you are creating a new habit and changing your spending.
Related post: The One Thing You Should be Doing to Be a Successful Budgeter
Mistake #3: Underestimating your expenses.
This one will definitely happen to you. When you first start budgeting, you really suck at knowing how much everything costs. A good rule of thumb is adding $50 to things that you are unsure of. If you have looked back at your gas expenses for travel/getting to and from work for the past months, you should determine your average cost.
In the first few months of budgeting, I would add $50 to that total to ensure you have enough gas money. The same thing applies to food, cosmetics/toiletries. Those tend to be the things you will overspend on initially because you forget things, and you won’t be used to curbing your spending in those areas.
Mistake #4: Not leaving any room for error.
Always leave a buffer. For the first few months, you should be leaving yourself at least $100 buffer in case you screw up somewhere and forget a bill. The last thing you want is to have to dip into your emergency fund or have your lights shut off because you forgot about a bill.
$100 may not cover for everything, but having a bit of a buffer will give you some security should you mess up (which you definitely will!).
Mistake #5: Using the same budget for every month.
This is a HUGE mistake! No two months look alike. Ever. I have been doing this for over three years now and I have no months that look just like another.
Using our Monthly Budget Forms is awesome and you can use the previous month’s forms as a guide, BUT no two months should look identical. There will always be differences somewhere.
If you are just copying one month to the next, then you are just going through the motions and won’t be successful. You will then go over budget on something you didn’t plan for. Take the time to look at every month as an individual month with its own needs.
Creating a specific budget for every month will set you up to win with your money!
Mistake #6: Not budgeting every single dollar and cent.
Here’s the honest truth about money. If you don’t tell your money what to do, it will disappear. This is a fact. If you have $500 every month that is unaccounted for within your budget, it will just disappear.
You WILL spend it somewhere. It will be known in the deep recesses of your mind that you have $500 just hanging out. Something will come up and some cute outfit will catch your eye and you will think, “I have the money. It wasn’t getting used for anything else. I won’t even miss it.” Boom you have a new outfit and are now missing that $500.
You have to tell every dollar where it needs to go or it won’t serve a purpose toward bettering your life. This means if you have $20 left in your budget you need to mark it for spending it somewhere, saving it for something or giving it to some cause. It can’t just be floating around in your account.
Figure out what you want it to do for you and make it happen.
Mistake #7: You don’t have a WHY.
Have you ever had a New Year’s Resolution that you didn’t actually accomplish? Why do you think you weren’t able to accomplish it? It usually isn’t a matter of not wanting to do something. It’s a matter of not wanting to do it badly enough.
The same applies to budgeting. If you want to actually start doing this in your life, you need to know WHY it is important to you. Your WHY needs to be bigger than any excuse or doubt that can come up and try to stop you.
If you don’t have a WHY then this is just a short-term experiment that likely won’t work for you.
Related Post: The Importance of Knowing Why You Want to Be Debt Free: Finding Your Debt Free Purpose
Mistake #8: You didn’t plan for unexpecteds.
Life is always going to throw curveballs at you and this includes right when you start budgeting for the first time. You are going to have unexpected expenses all the time. The best way to handle these is to expect them!
Seems simple enough, right? Always make sure you have an emergency fund in place. When these unexpected expenses come up, typically you just need to revisit your budget, shift some of your spendings around and find the money for the expense.
To build on this for the future, keep a running list of the month and the unexpected expense that happened (ie. you forgot your yearly dues for an organization you belong to, you forgot your niece sells Girl Scout cookies every year). Then when you go to make your budget for that month the next year, you can see what came up that you hadn’t previously been prepared for.
