When it comes to budgeting, it usually takes a while to get good at it. It took us several months to get it right and we still have to tweak it from time to time. When you are starting out it is easy to make some mistakes and you probably will, but use them as experience to help you get better with the next budget. There is usually a common theme to budget mistakes, so I’ve made a list of nine common budget mistakes you are probably making (or will at some point). Need some help with your budget? Download a FREE Budget Template for Excel at the bottom of this post! I personally use and love this one.
1. Buying on Impulse
Impulse buys can really add up. I know it’s a killjoy to deny yourself because “it’s not in the budget”, but you would do well to remember what your goals are when you are shopping and find yourself tempted to buy something not in your budget. Even a simple item that is only $1 will add up in the long run. Let’s say you give in and add an extra dollar item twice a week – that’s $104 a year. One of the things we had to do was simply not go shopping unless we really needed to. We used to go to Wal Mart just to get one or two things and then just walk around. Inevitably we would find things we “needed” and spend way more than we had planned. Now, we go with a list, get what we need, and get out.
2. Forgetting to Keep Track of Your Expenses
This used to be very difficult for us, because one of us would go shopping and then we would just see “Wal Mart $135” on our debit. Without the receipt, how did I know how much went to toiletries/food/clothing/etc? It was a major hassle and was one of the reasons we started using the envelope system. Now, we don’t have to track expenses – we just use the money from that particular envelope and when we run out we can’t buy anything from that category again.
If you do use debit or credit, keep up with your receipts so you can figure out how much you are spending in each category. That way you will be able to adjust your budget for the next month if needed.
3. Making Too Drastic a Change at Once
When we started budgeting, we found we were spending over $400 a month on eating out. That was way more than necessary! If we had suddenly said, “okay, we are only going to eat out once a week for $25!” and tried to implement that suddenly, we would have failed. You can’t change your habits overnight. You should slowly wean yourself off of spending so much on a category. Let’s say we spent $25 a meal for two people so that means we were eating out on average 16 meals a month, or four times a week. To be realistic we should change it to 2 or 3 times a week to start, then move down if we felt it necessary. If we had tried to change it to one time a week immediately, I’m sure we would have given up.
4. Forgetting to Budget for FUN!
You must make fun a priority somewhere in your budget. Even if it is only a few dollars it should be in there somewhere. We never know what we might find to do during the month so I allot a $40 “Entertainment” budget. One month we went strawberry picking, another month we saw a movie, and another we used it as an extra dining out opportunity but took the kids to a play place.
We also plan for what Dave Ramsey calls “Blow Money”. We have a “Pocket Money” category that my husband and I each get $25 per paycheck to spend however we like. If you have any extra at all I would definitely recommend this. Sometimes mine goes to cover an unexpected birthday present or even dining out, but it always feels nice to have just a little bit that you can spend on yourself. My husband uses some of his to buy sodas since he drinks them at work. The beauty of it is that you can do whatever you like with it and not deviate from the budget.
5. Beating Yourself Up.
You will deviate from the plan sometimes. Everyone does! Don’t be too hard on yourself. Just adjust next month’s budget and keep trying. Like I said before, it will take you several months to get it right. Be flexible. You will have to adjust your flexible expenses sometimes. We recently had some unexpected medical bills and had to cut out a few meals out to pay them. Not a big deal. We just ate at home instead and adjusted the budget.
6. Not Making a New Budget Every Month
Even though I have been doing this for a long time, I still make a new budget every single month. Now, I do not sit down and write out a budget from scratch every month. What I do is look at last month’s numbers and adjust for the new month. Most expenses pretty much stay the same, except our utilities, so it is easy to come up with a budget for the new month. In fact, now that we’ve been doing it for so long, it only takes about 15 minutes to create the new budget – and that includes figuring out how much cash I want to include in each envelope.
7. Forgetting to Save for the Unexpected
You really need to have some type of emergency fund. I remember thinking that it was interesting that Dave Ramsey made the small $1000 emergency fund his Baby Step One. Then I read that he originally started with the debt snowball but people would have unexpected expenses come up, put them on credit, and get discouraged. When you have a small emergency fund you can catch the things that come up unexpectedly without have to charge anything else on your credit card. You will have to stop paying back extra on debt to refund the emergency fund, but having even $1000 in the bank to catch unexpected expenses is a huge help. Something always comes up.
8. Forgetting to Budget for Once- or Twice-a-Year Items
This past year for some reason I didn’t put money aside each month for Christmas. What was I thinking?! We know when Christmas is and should not wait until the last minute to think about how to pay for it! Luckily my husband got some extra money in that was almost enough to cover it (and we do not go crazy with gifts, either). There are things that should be in your monthly budget that you will put aside until you have to pay them. Christmas is definitely one. Also, things like car tags, car/home insurance, or property taxes if you don’t pay monthly. To figure out how much to save, take the cost of your item and divide it by how many months you have to pay it. For example, if you pay your car insurance every 6 months and it is $600, divide $600 by 6 to get $100 a month. If you have a bill you only pay once a year, divide by 12.
9. Giving up.
This process will take time! There have been lots of months that I wanted to give up in the beginning, but I am so glad we didn’t. Now we are so close to paying off all debt except the house and we live beneath our means and plan to stay that way. If you are new to budgeting, please give it at least 6 months. By then you should really start to get the hang of it and see that it’s not as hard as it seems. You can do it!
I hope you enjoyed this list as much as I enjoyed coming up with these ideas. If you have any other ideas or questions, please leave a comment below!