We all know that budgeting helps us to have a better picture of where our finances are and helps us to be more fiscally responsible…but there are also many mistakes made along the way. Do you find yourself short on money at the end of the month? Taking from one line item to pay off another? Today, I am going to share with you some of the biggest mistakes people make when budgeting.
If you are signed up for my weekly newsletter{if not, what are you waiting for?}then you have seen that in the first email I ask what is your #1 financial struggle. I truly do want to know about you and what you find difficult when it comes to saving money. This helps me to help you.
One of the things I hear very often is how much you struggle with budgeting. Even the most budget savvy people can struggle with sticking to a budget. In order to help you learn how you can change your behaviors we need to figure out where you are making mistakes with your budget.
If you are interested in getting started with a budget you can download my free monthly budget template here or get my Yearly Household Budget spreadsheet.
Mistakes You Are Making Budgeting
Not Planning for all Expenses
There are a lot of places that we spend our money…housing, groceries, entertainment, etc. You must prioritize on the line items that you create (and know which ones are non-negotiable, like mortgage or rent.) When you look at your budget, you should have a clear plan for each time you spend money.
Which category will your groceries come from? How about your gym membership? Trips to the doctor? By carefully planning which funds you’ll deduct each of your expenses from, you’re setting yourself up for success with your budget.
Not Keeping on Top of Your Budget
A budget cannot be a spreadsheet or ledger that you create and then go several months without going back to. In order for your budget to work seamlessly, you need to have a plan for how frequently you’ll track your expenses and deduct from each of your line items.
The longer you let it go, the more challenging it will be to enter your various expenditures. If you return to it more regularly, each budgeting session will take you less time and will be more manageable. By setting a regular time (such as each Saturday morning, Sunday nights, etc.) to do your budgeting, you are more likely to keep on top of it.
Your budget is pointless if you cannot use it to plan your next month’s expenses. It is meant to help you learn about your spending habits and figure out ways to cut back on unnecessary expenses.
{Related: Bad Spending Habits}
Not Keeping Track of Expenses
A vital component to a strong budget is watching your spending and keeping track of each time to deduct from your account. One way to do that is to save each and every receipt.
When it comes time for budgeting, use those receipts and make sure that each is entered in your checkbook, before deducting from your budget accounts.
Another way is to watch bank and credit card statements and use that information to determine where you spent your money. This can be done weekly so that you can see how much money you have on a daily basis. You want to make sure your budget is able to pay all of your necessary expenses like food, transportation, housing, etc.
Not Being Honest with Yourself
As you plan your budget, be honest with yourself about how much you actually spend in each area. If you have the money to designate, then allot appropriate amounts to match your spending habits. Keep in mind that your goal is to put as much as possible in savings, but if you short-change your line items each month, then you’ll find that fund to always be in the red.
If you find that your budget funds are consistently in the red and you don’t have a cushion going into savings, then that would mean it’s time to take a look at spending habits and reevaluate those areas where you can cut back on spending.
It is hard to see face the facts. Even though you may know you are spending too much money on entertainment expense each month it is tough to face the actual amount. You need to be honest with yourself and realize that it is time to make some changes to help your financial future. Instead of dining out as often learn ways to cook copycat meals or skip the movies and have a date night at home.
Taking from One Account to Pay for Another
We all may be guilty from time to time in noticing a surplus in one line item and shifting it over to another that is lacking. While occasionally that may be okay to do, it may mean that you don’t have the money in your account when you need it.
For example, if you have extra in your account for car expenses and you use it to pay for a higher-than-normal utility bill then you may not have enough to cover that unexpected car repair the following month. By carefully budgeting and accumulating a surplus in each budget line item, you are planning for those unplanned expenses.
This is one of the reasons why it is really important to start to build an emergency fund so that you do not have to steal from peter to pay paul.Do you know of other mistakes you are making with your budget?
