Common Mistakes People Make When Budgeting

No person is perfect, and no budget will be perfect, either. In fact, budgeting is both an art and a science, and the most successful budgeters understand their budget will ebb and flow. Change and readjustment is normal, especially as you’re just beginning to understand your spending behaviors and shortcomings. Here are a few common mistakes people make when they budget:

Guessing Your Expenses

You may think you understand your spending habits pretty well, but the bottom line is that guessing tends to be inaccurate no matter what category of your budget you are guessing at, unless it’s a specific, fixed monthly expense like a rent or a mortgage. However, most expenses will vary slightly from month to month. If you think you’re spending $40 per month on a gym membership and the reality is $75 per month, you’re going to find it difficult to keep your budget accurate, and you’ll end up in the red without understanding why.

Only Paying Attention to Big Ticket Items

You might budget for a vacation six months from now or purchasing a new iPhone, but forget that every time you eat out or buy coffee while you’re out needs to be accounted for too. Having long term financial goals and making progress toward bigger purchases is important, but so is assigning a “job” for every dollar and understanding where that money is going at all times.

Not Starting an Emergency Fund

It’s common to think, “Oh, I’ll start my budget first and worry about my emergency fund after.” But the reality is that the best budget is one that helps and enables you to make progress towards your emergency fund and savings while you’re paying for your day-to-day expenses, too. Budget an automated payment each month and put it into your emergency savings if you can.

Leave a Reply

Your email address will not be published. Required fields are marked *