WE ALL MAKE MISTAKES WITH OUR BUDGETS, EVEN THOSE WHO SEEM TO HAVE IT ALL TOGETHER FINANCIALLY.
Do you make these 9 Budgeting Mistakes?
MISTAKE #1: NOT HAVING A BUDGET AT ALL. Taking the time to sit down and actually make a written budget each month is essential. Like Benjamin Franklin said, IF YOU FAIL TO PLAN, YOU PLAN TO FAIL. I made my first budget this year. Before that, I used to wing it. If I still had money after paying my bills, I would buy whatever I wanted. That was my budget! Before my budget, I’d be in line waiting to spend $199 for the new iPhone 5S.
MISTAKE #2: HAVING A BUDGET, BUT NOT USING IT. This is my biggest budget mistake! I sit down and write a monthly budget a couple days before each month. I think about what extra expenses I’ll have for the month: birthday gifts, Halloween costumes, football tickets, etc. BUT then halfway through the month, I see something that I really WANT and I buy it. And my whole budget it thrown off! Yesterday I bought Cole Haan shoes for 80% off. I can always justify spending the money (i.e. It’s for a Christmas party!). But it wasn’t in my budget!
MISTAKE #3: NOT PLANNING AHEAD FOR AHEAD FOR AN EMERGENCY. Life happens! Before I started my emergency fund this year, every time that my 2004 Chrysler PT Cruiser broke down (which used to be pretty often!), my entire budget was thrown off. Every car repair was a crisis. Now, life is much less stressful with an emergency fund. You can add your emergency fund to your monthly budget and gradually save up to 6 months of your monthly expenses.
MISTAKE #4: MAKING A BUDGET THAT IS TOO STRICT. I listened to Dave Ramsey’s advice of cutting down on grocery expenses by living on “beans and rice” but I took it too far. I stopped buying meats almost entirely. I stopped eating dinner out with friends, ever. I stopped spending ANY extra money. I took extreme measures to become debt free and it worked. BUT in retrospect, living like that wasn’t healthy for me. There should be a healthy balance of living life while still budgeting and saving.
MISTAKE #5: NOT BEING SPECIFIC ENOUGH: It’s important to make a budget that is specific. When I wrote my first budget, I randomly came up with rough guesses on my expenses because I really didn’t know how much I was spending.
My first budget looked like this (And it was completely inaccurate):
MISTAKE 6: NOT BEING REALISTIC ENOUGH. In my first budget, I made assumptions that were completely unrealistic. I assumed that I spent only $100 per month on eating out. But in reality, I was spending over $800 per month on restaurants and dining out. Wow. I realized that when I looked at my online banking statements. It felt like I got a raise when I budgeted $100 for eating out each month (which isn’t a lot!) and started cooking at home everyday.
MISTAKE #7: COMPARING YOUR BUDGET TO YOUR FRIEND’S BUDGET. We all have different lifestyles and priorities. So, we all have different budgets based on those priorities. Your budget will be different than your friend’s budget and that’s ok. I don’t spend money on cable. Michelle at Making Sense of Cents also wonders about whether cable is worth the money. But John at Frugal Rules has excellent reasons for keeping cable (yes, footbal is one reason!). I have a friend who spends $900 per month on a car payment, which I don’t understand because I don’t have a car payment. But there are also some things that I refuse to give up to save money!
MISTAKE #8: GIVING UP WHEN YOU MAKE A MISTAKE. It’s easy to want to give up on a budget after buying something that ruined your budget for the month. But budgets aren’t perfect and they will evolve. So, instead of giving up on the budget completely, think about how to prevent blowing your budget next month. Was your budget not realistic or specific enough? Did you forget to budget for Halloween or a friend’s wedding? Use it as a learning experience and move on instead of spiraling into a shopping spree where you begin to blindly spend without a budget.
MISTAKE #9: NOT BUDGETING FOR FUN. Remember that having a budget doesn’t mean you can”t spend money, it just means that you’re not spending your money blindly. Make sure to budget money for fun events, vacations, or holidays. Crystal at Budgeting In This Fun Stuff writes about having fun while budgeting. Now, I budget $140 per month on FUN so I spend that money without feeling guilty!
I’d love to hear your thoughts! WHAT WAS YOUR BIGGEST BUDGET MISTAKE?
Thanks to these personal finance blogs for mentioning my articles this week!
- Budgeting In The Fun Stuff by Crystal
- Frugal Rules by John
- Young Adult Money by DC
- Digital Spikes by Rita
- The Frugal Farmer by Laurie
- Debt Blag
And Thanks to these Carnivals for including my articles too!
Carnival of MoneyPros hosted by Money Pros
Yakezie Carnival hosted by Money Life & More
Finance Carnival For Young Adults hosted by Degrees and Debt
Carnival of Financial Independence hosted by Savvy Scott
Carnival of Financial Camaraderie hosted by Frugal Rules
Carnival of Financial Planning hosted by This That And The MBA
Festival of Frugality hosted by The Frugal Toad
Carnival of Money Pros hosted by Money Wise Pastor