Much to my dismay, a lot of people still look at budgeting as a negative experience. Budgeting means people are tied down to their money. Budgeting means people can’t have fun. Those thoughts and more convince people that budgeting is a bad thing. Quite honestly, budgeting is the best thing you can do for your finances! When you are thinking the worst about budgeting, you can easily overlook budgeting blunders and mishaps.
I want you to change your tune when it comes to budgeting. Budgeting gives you full control into how your income should be spent. If you are starting your budgeting journey off on a negative foot, of course it will be a miserable experience! When you’re ready to give budgeting a try and be open to its benefits, then I’m sharing 5 commonly overlooked budgeting blunders for you to avoid.
Why Everyone Needs to Budget
Before I get into common mistakes people make with budgeting, I want to stress the importance of actually having a budget. I go into a lot more detail in the article 5 Reasons Why Everyone Needs a Budget. To sum it up for you here, the most important reason everyone needs a budget is because without one, a person has no clue what they are spending, what they could be saving, and what’s costing them more money than it should.
A budget outlines where your money should be going. When you know this information, you can actually make it happen! You can ensure that your money goes to the right places, and from there, you can start making the proper moves with your money to reach your financial goals. Now that you know why you should have a budget, let’s talk about mistakes to avoid when budgeting.
Commonly Overlooked Budgeting Blunders
#1 Not factoring in variable expenses
One of the most common overlooked budgeting blunders people make is forgetting about variable expenses. Variable expenses are things you spend money on but they don’t have a specific amount or due date. These things include Groceries, Gas, Pet expenses, Toiletries and Grooming, Entertainment, Dining Out, and more.
We all have variable expenses, so failing to include an amount for these types of spending categories can result in your budget not working properly. If you aren’t sure how much income to allocate towards these expenses, start by looking at what you have spent on these items in the past. Take the average amount for the month and start there.
#2 Failing to allocate fun money
It’s easy for people to leave out fun spending in their budget because it’s not a necessity. Unfortunately, that sets people up for failure. It’s not realistic to think you can go months and months without spending any money on yourself. More importantly, it’s not a way to live life.
Now, I’m not saying you should overspend on fun things, but finding a balance is critical for budgeting success. If you aren’t sure where to start, or you don’t have much money left over after your priorities are taken care of, then give yourself $50-$100. Start there and see if that’s realistic for your situation. You can always adjust in the future.
#3 Not budgeting savings
When your goal is to save money, it’s important to make sure your budget accounts for that savings amount. Even when your goal isn’t to save money, you still want to make sure that any automatic savings transfers are included in your numbers. If you don’t make sure those savings transfers are included in your budget, you run the risk of having to take money out of savings.
After all of your priorities are taken care of, what do you have left? That left-over amount is what needs to be allocated towards fun spending, savings, and your financial goals. Don’t overextend yourself because you’ll wind up making your budget unrealistic. An unrealistic budget usually gets thrown out the window!
#4 Not accounting for unexpected expenses
The thing about unexpected expenses is that they are unexpected! We don’t plan on them happening, and when they do happen, they always throw us for a loop! Instead of getting caught off guard any time an unexpected expense pops up, start factoring in those things into your budget.
I think you can plan for the unplanned in two ways. The first way is by adding a category into your budget specifically for unexpected expenses. You can allocate a certain amount of money to this category each month to help you cover anything that comes up that you didn’t plan for.
The second way to account for unexpected expenses is by having an emergency savings. This doesn’t need to be your true emergency fund (though that will work just fine). This savings just needs to be used anytime an unexpected expense comes up and tries to throw your budget off.
Neither of those options will be a bad approach, so find what works best with your numbers and start planning for the unplanned!
#5 Forgetting about non-recurring expenses
The final item on the list of commonly overlooked budgeting blunders is forgetting about non-recurring expenses. When you are laser focused on your budget, it’s natural to only think about the expenses you see every month. However, those non-recurring expenses (think every six months or once a year) still need to be accounted for.
When you forget about the non-recurring expenses, you run into the same scenario above with unexpected expenses – your budget is thrown for a loop. The thing is that this situation can be avoided by thinking through all of your expenses, even if they only happen once a year.
I have a few of these expenses and I handle them the same way – I take the annual amount needed to pay for all of the expenses and then divide it by 12 to get a monthly number. Once I know that number, I put it into a savings account each month to cover the expenses when they come up. This turns a non-recurring expense into a monthly expense!
Need help avoiding some of these budgeting blunders? Schedule a free consultation with me and we can work out a game plan for you!
Related: 5 Budgeting Myths to Forget Now
I hope I’ve convinced you that a budget is important and how to make one work for your situation! As rough as the beginning stages of budgeting can be, there is a light at the end of the tunnel! Have you made any of the mistakes listed above with your past budgets? How did you get through it? Post a comment below to share some of your experiences!
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Is your budget working for you? @bcg17 @lexipearthree @shannonmurr @kenzieraboin @emceesq @Jmanzella320 @torimitchell You may be making a common mistake with your budget, check out 5 of them in this article!