Biggest Budgeting Mistakes : How You Can Fix Them Now

By | February 5, 2019

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(Last Updated On: February 18, 2019)

Do you make these common budgeting mistakes? No worries. I’ve made common budgeting mistakes too.

The good news is you can learn to avoid them and and stay ahead in your budgeting.

CNN reports that only 41% of Americans use a budget. 70% don’t have $1000 in the bank. Almost half of Americans would need to borrow money or sell something to get $400 to pay for unexpected emergencies.

 

Pig standing on notes

 

What are the common budgeting mistakes you must avoid?

#1. Not tracking your budget

It’s important to track your budget and savings.

If you don’t how much you’re spending and saving, how do you know if you’ve enough money to spend in the first place?

Tracking your budget gives you a clear overall picture of your financial health. It also helps you to plan better with a laser-like focus and steers you in the right direction.

What’s more, it’s good for your motivation, as you know with greater certainty that you’re on track to achieve your money goals.

Tracking your budget has never been easier. Download my free budget success planner. It’s very simple and easy to use. You simply fill in information under the main budget categories. Find out if you’re saving or in debt or breaking even.

#2. Over reacting

Once we realize our budget needs urgent attention, we tend to react quickly. We go overboard and start to set dozens of budgeting goals, in the hope of turning the situation around quickly.

But we do more harm than good when we’re impatient and overreact.

It pays to remain calm and draw up a realistic budget. We need to identify the most important areas of spending that we can cut back to gain a maximum effect.

For example, in my family’s case, we can’t reduce our property tax. By law we have to foot this tax bill, unless we choose to sell our home and become tenants.

But we can choose to not buy branded shoes or clothes for a year or even longer. These are not essentials. Yes, there’s some pain. But it’s a good start.

#3. Not having a budget

Everyone needs a budget.

It doesn’t matter if you’re super rich or super poor.

Keeping a budget is similar to a financial health check.

You’ll get a good idea of how much money is coming in and how much is going out.

The amount you get to keep is the most vital. That’s what we should all aim for.

Subscribe and get a Free Budget Success Planner that’s easy to follow. This is exclusive to readers of More Money Tips.

We saved more than $40,000 on a modest income using a ‘raw’ form of this planner. Its looks has improved a lot, that much I can tell you.

Read this post on How to budget Your Money and Become Rich.

It’ll help you to make a budget you can sustain.

#4. Not knowing how much is needed to pay your bills every month

Do you know how much is needed to pay your bills every month? The fixed and variable amounts of your spending add up to your total expenses each month.

Fixed amounts include property tax, phone bills, internet bills, mortgage payments, house insurance and so on. To a certain extent, these can be changed – you can switch to a cheaper phone company or internet provider.

Variable amounts can be reduced quickly. Some examples are eating out and buying snacks and drinks.

Find out the fixed and variable amounts you need to pay each month. Then decide which variable spending you can reduce, without causing too much discomfort.

You can decide to make one change per month. If you feel comfortable, add another change the next month. The idea is to make a start and gain momentum over time.

#5. Falling behind in your payments

This is big No-No.

You must make every effort to pay your bills on time. Incurring penalties is a sad waste of money.

You’re paying extra for nothing.

Automate your payments if you find it irksome.

There’re many budgeting apps out there so there’s just no excuse.

We automate our insurance, internet, phone and power bill payments as they are due monthly. Sometimes power companies may even pay you to save power.

I’ve discovered that OhmConnect pays their users to save energy once a week. You’ll need to connect your utility account and this service is available to to 95% of the homes in California.

I prefer to keep track of our property tax payments manually.

The reason being that the tax is a huge sum of $673 for every 3 months. The pain of paying this motivates me to save better.

Besides, I want to ensure that there’re enough funds in our checking account for this.

Routinely, we’ll manually transfer our savings into another account that pays a higher interest rate.

#6. Setting overly ambitious goals

Setting goals such as “I’ll save $1000 this month” is unrealistic for those on a lower income.

It may frustrate and demotivate you instead. Decide on your own saving goals that are achievable.

While high income earners are able to save much more once they’ve decided to cut back, lower income earners must celebrate each budget or saving win too.

As long as we’re moving towards our own goals, our wins will continue to motivate us to keep going. We must make sure our goals are sustainable in the long term.

#7. Not developing consistent habits

You must develop the habit of tracking your spending consistently. For example, I always jot down how much we have spent each day, and what the money was spent on.

By noting this, we know whether we’re spending money on unnecessary items.

#8. Not taking into account big bills that arrive at the same time

You must take note of when multiple big bills are due, especially if they arrive around the same time.

Our big regular bills are our property taxes. They’re due every 3 months! Sometimes this coincides with our house insurance bill.

I note these dates in my diary. We make sure there’re extra funds in the checking account to cover this amount 2-3 weeks before it’s due. This affects our savings goal, but it’s a necessary evil.

#9. Not knowing how much is needed for each category in your budget

You need to have an idea of how much you spend in each budget category. In this way, you’ll know if you are able to reduce the spending in that category.

For example, if you know you spend $200 on eating out each month, you can reduce it by $50 a month, by cutting down on the number of times you dine out.

Personally, I thought I wouldn’t survive cutting back on dining out. But over time, I’ve actually gotten used to it. When we do dine out, I appreciate the experience so much more.

#10. Not taking care of little emergencies

Most of us forget to budget for little extras like co workers’ farewell dos or gifts.

Try this.

Regularly collect all your loose change and put them in a special jar. Don’t use the money in this jar for other purposes.

This way, you’ll always have some money on standby. You won’t have to feel guilty dipping into your savings.

#11. Working with your other half

Don’t underestimate the power of working together.

Set aside some time once a month to discuss your financial goals with your other half.

Mr MMT and I have found setting our financial goals together and working as a team to achieve them has strengthened our finances.

#12. Not having an emergency fund

Life can sometimes suck and unforeseen expenses do happen. Your trusty car may develop a problem that needs fixing. You might have a toothache that needs dental work.

Make no mistake!

You need a reasonable emergency fund to take care of unexpected spending. Make setting up and growing your emergency fund a top priority.

The comfort of knowing you can pay for unexpected expenses without borrowing or going into costly credit card debt does wonders for your peace of mind.

#13. Not paying off credit card debt

Letting credit card debt accumulate is a fatal mistake. Credit card interest rates are crippling high.
Yes, as much as 23 percent!

And any amount not paid off will be charged interest and compound
interest.

Urgh…not a pretty picture.

An effective way to save money is to channel as much money as possible to slash the amount owed on your credit card. You ‘owe’ it to your future self!

#14. Sticking strictly to your shopping list

Wait a minute! Isn’t it a good thing to stick to your shopping list?

When shopping, it’s good to be flexible within reason.

If we use an item regularly and it’s on sale, it’s actually a good idea to buy more of it.

Although I use a shopping list, I’ll check periodically for items that I use, to see if they are on sale.

You save more this way by stocking up on sale items that you need anyway.

#15. Focusing too much on getting credit card rewards and benefits

To attract people to spend more, credit card companies “give” you rewards that come if you hit certain spending targets.

You know what the rewards are – airpoints, points exchangeable for gifts and so on.

But remember, it’s never a good idea to keep spending to get rewards.

It’s far better to spend less as you’ll get ahead financially. Ignore the carrots that crafty bankers dangle.

#16. Confusing Wants with Needs

Consumerism is a huge threat to your financial wellbeing.

The tentacles of advertisers are everywhere.

Their singular mission is to get more of your hard earned money.

Never be fooled by adverts on the latest trendy wear or gadgets like iPhones.

Sadly, I know of many folks who fall for the Apple hype – they use hire purchase and end up with high interest debt, just to buy the latest iPhone (which won’t be the latest in about a year!)

Firmly stick a note on your credit card.

The note should say something like “Do I really need to spend $$$ on this?”

This note will help to remind yourself that what you have is often enough for your needs.

It’s far better to have more money than to have more stuff that aren’t worth much anyway.

#17. Falling prey to ‘easy’ credit

In this world of easy credit, it’s quite easy to gain the illusion that we can afford lots of stuff.

For instance, we can drive away a car with easy payments of $35 a week.

Such “awesome” deals lure the unwary into high interest debt to buy things that are usually not needed.

So what are we to do?

If you know that your car is getting less reliable as it gets older and older, you really need to start saving hard now.

This way you’ll save a lot of money on interest when you have
a bigger down payment.

#18. Not minimizing the cost of things that lose value

Lots of things we buy usually lose their value once they are out of the shop.

Therefore don’t pay more for “premium” models just because you’re attracted by all the advanced bells and whistles that the newest gadgets boast.

Are these extra features really needed? Is it important to have face recognition on your cell phone? Do we need to buy the biggest screen TV or PC?

No! Buying the cheaper and simpler models (when needed) saves you lots of money.

#19. Not limiting ‘fun’ money

Most folks forget to limit their ‘fun’ money.

Sure, life is for living, but it’s not much fun when there’s a cloud of debt hanging over our heads.

It’s all about balance.

Fun money makes life rewarding, but we also need to remember that not overspending and keeping to the amount set aside for fun money helps us achieve our financial goals.

Consider what you deem is a reasonable amount for your fun money and keep within it.

#20. Being too trusting

For years, we’ve assumed the our companies provide the best deals as we’ve been their loyal customers.

Not shopping for the best deals in phone plans, electricity plans, insurance plans, health insurance plans and so on was our initial mistake.

Don’t meekly accept the payment requests like we did. We were paying our house and life insurance plans dutifully despite annual increases.

We finally had enough and took action in How I save $554 in under an hour and 5 easy steps to saving hundreds on insurance.

Wrap Up

Now that you know these common budgeting mistakes, it’s time to get started. Choose one or two to work on. Allow yourself more time and be patient. I know you CAN do it.

Thanks for reading this article.

Leave your budgeting tips with our readers in the comments below. We’d love to hear from you.

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