Common budgeting mistakes you could be making and what you can do to fix them! Are you making any of these budgeting mistakes?
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Dave Ramsey always says that unless you make a plan for your money, it will disappear without you even realizing it. He’s talking about budgets here.
When you’re new to the world of creating budgets, things can be pretty overwhelming. And it’s pretty much a given that you’re going to make a few budgeting mistakes, at least until you get the hang of things.
But you don’t have to figure this whole budgeting thing out on your own. There’s no need to reinvent the wheel here. Instead, you just need to be aware of some common budgeting mistakes so you can avoid them and make the most out of your budget each and every month.
Today, I want to share with you the budgeting mistakes I see most often. They’re the ones I used to make, and they’re also the ones that trip up a lot of new budgeters. I think you’ll find these mistakes enlightening!
So let’s get started, shall we?
7 Budgeting Mistakes You’re Probably Making
1. Not including budget categories for irregular expenses
Unless you’ve been budgeting for a significant period of time, there are probably a few categories that you forgot to include. They’re easy to forget because they don’t occur on a monthly basis. Some irregular expenses you may have forgotten to include in your budget are
- Home maintenance and repairs
- Car maintenance and repairs
- Yearly vehicle taxes and registration
- Vet visits
- Tax prep fees
Be sure to add these irregular expenses to your budget so you never get caught off guard. And it may be helpful to glance over the last few months of your debit and credit card statements to see if there are any other irregular expenses you may have that I didn’t list here.
Also, be sure to budget for your emergency fund. It isn’t technically an irregular expense, but it’s still a category that some people forget to include in their budget.
Related: 4 Reasons You Need an Emergency Fund
2. Not using the cash envelope system to enforce your budgeted amounts
It’s easy to decide how much money you plan to spend in each category of your budget. However, actually staying within that budgeted amount is a whole different story!
If you truly want to stick to your budget, you need to use the cash envelope system. This system forces you to stay within your budgeted amounts because you’re limited by the amount of cash you withdraw to fund each budget category, or envelope. Once the cash is gone, you’re done spending for the month!
If you’d like to try this system for yourself, I wrote a post that shows you how to use the cash envelope system like a pro.
I should warn you that this system will forever change the way you approach budgeting! Before we switched to the cash envelope system, we consistently overspent in every single budget category month after month because we didn’t have any checks in place to keep us accountable. Now that we’re on the cash envelope system, we actually come in under budget more often than not! It truly is a game-changer.
3. Not making a new budget each and every month
Each month is different, and each month brings with it different expenses. That’s why you can’t use the same budget month after month and expect it to work.
For example, if you spend $150 on gas during a normal month, then you’ll blow your budget when you drive your family 200 miles away for your annual vacation. You have to tailor each budget to the new month so you can account for those extra expenses.
4. Not consulting your calendar before you plan your budget
Continuing from the previous budgeting mistake, you have to create your budget according to the events you have planned. That’s why it’s helpful to consult your calendar so you can see a nice overview of the upcoming month.
Three of your close relatives are having birthdays this month? Great! Set your gift category high enough to cover three birthday gifts.
You’re going on your annual family beach trip? Awesome! Adjust your gas, entertainment, and restaurant categories accordingly.
Winging your budget each month is a costly budgeting mistake because you’ll end up with a lot of “gotcha!” expenses that will derail your budget. Instead, look over your calendar so you can properly plan for all the events you have coming up.
5. Making your budget after the month begins
When you make your budget after the month begins, you allow yourself time to spend money unchecked. Often, you end up spending money on things you don’t really need or things you really can’t afford.
Instead, create your budget a few days before the month begins so you have a clear plan for your money before you get the chance to spend a single cent of it.
6. Not including some fun money in your budget
Let’s be honest. Sometimes sticking to a budget can feel a little bit limiting, especially when you’re at TJMaxx shopping for a gift and happen to see something you’d love to have for yourself. You can’t restrict yourself 100% of the time and expect to stick to your budget. Well, maybe you can, but you certainly won’t be happy!
You’re far more likely to throw in the towel if you feel like your budget is too restrictive. To prevent yourself from completely blowing your budget in a moment of weakness or frustration, include some fun money that you can spend however you want.
Now, don’t go crazy here. The key is to make your fun money a reasonable amount so you can treat yourself without jeopardizing your financial health. Consider your current financial situation and your financial goals when you decide how much your fun money category will be.
Each month, Josh and I each get $20 of fun money to spend however we choose. This number may seem small, but that’s because we’re in the process of paying off $80,000 in student loan debt. Our big goal is to become debt-free, so we want most of our money to go toward his student loan rather than stuff we don’t really need.
7. Setting your budget categories too high or too low
When you’re new to budgeting, you should expect your budget categories to be a little off. It’s perfectly normal to set your categories too high or too low until you gain a better understanding of your spending habits.
However, if you find that you consistently come in under budget in some categories and exceed your budgeted amounts in other categories, then something is amiss. You’re either a little too lenient (by setting your categories too high) or a little too unrealistic (by setting your categories too low).
Take a good look at the last three months of your spending to see how much money you typically spend in each budget category. Model your next budget using these numbers.
Wrapping It Up
When you’re new to budgeting, it’s a given that you’re going to make some budgeting mistakes. The important thing is to be aware of some common budgeting mistakes so you can avoid them as much as possible. When you do that, you’ll be one step ahead and well on your way to becoming a savvy budgeter!
And if you’d like to step up your personal finance game another notch, I highly recommend you check out Dave Ramsey’s book The Total Money Makeover. It will teach you everything you need to know to achieve financial freedom!
Other Posts You May Enjoy
- The Best Financial Advice I Ever Received
- 30 Ways to Save Money So You Can Reach Your Financial Goals
- 7 Free or Cheap Ways to Exercise on a Budget
- Want to Take Charge of Your Finances? Here’s How Dave Ramsey Can Help!
- How to Know Which Financial Advice to Follow
- Living Below Your Means: The Real Secret to Building Wealth
- No-Spend Month Results: What We Learned from Our First No-Spend Challenge
What about you? Have you seen some budgeting mistakes that I forgot to include in this list?
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