Budgeting is a concept that can take some practice and habit forming to get used to. Going from flying by the seat of your financial pants to planning things out comes with a learning curve that shouldn’t be ignored.
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To that end, this article is going to spend some time reviewing some of the most typical budgeting mistakes I’m seeing people make today. Most of us have been guilty of at least one of these at one time or another, but by pointing them out as errors, I hope to reduce your chances of falling into these traps.
Mistake #1 Not tracking your expenses
This is the easiest thing to stop doing. You sit down at the beginning of the month and form a plan, the plan sounds good, and then you don’t track how your expenses progress throughout the month and before you know it you’re where you started. So, what happened? Unmanaged spending is out of control spending, and increases your chances of blowing your budget at least two-fold (if not more).
Mistake #2 Funding expenses in one category with funds from the other
This is another common mistake, thinking you can spend a little less in one category to spend a little more in the other. The reason it’s a mistake is this, while it’s all well and good to PLAN to survive on less, you formed your budget with your needs in mind – so every dollar is needed in that category and you will likely end up spending it anyway. This leads back to overspending and is another popular budgeting trap.
Mistake #3 Using credit as a survival method
Credit cards can be a great way to cover expenses in the event of an emergency, or to earn rewards if you know the balance can be instantly paid back. But credit cards should NOT be used to extend your spending in one month into the budget for the next. This will lead to forgotten balances, encourage overspending, and cost you so much more in the long run. Not worth it.
Mistake #4 Tempting fate
Budgeting can be a hard-enough learning process without putting yourself in the way of temptation. If you’ve already spent your food budget, don’t go to the cafeteria at lunch. If you’ve used up all your discretionary spending, don’t check out what’s playing at the cinema. Putting yourself in temptation’s way greatly increases the chances of overspending and blowing your budget, and it just hurts even when you manage to avoid it.
Mistake #5 Failing to prepare for the future by saving
A lot of people assume they’ll use discretionary funds for saving, when there’s excess left, rather than planning to save at the start. This really decreases your chances of saving at all, not to mention decreases the amounts you contribute, and puts you in a position where you’re dangerously close to falling behind.
Mistake #6 The Big One. Not communicating with your partner.
The single biggest budgeting mistake I see people make is this: not getting on the same page as their partner about the goals for the future. It’s all well and good to be working on yourself, but if your partner isn’t doing the same they could end up spending every dollar you’re trying to save. Sit down together and make a budget that works for both of you, to increase your chances of succeeding.
Budgeting isn’t easy, and takes time to learn. It’s my hope that by identifying some of the most common pitfalls, I’ve helped increase your odds of success. Remember, if at first you don’t succeed, TRY AGAIN!