The Top Four Budgeting Mistakes You May Not Realize You’re Making
One of the easiest ways to manage your money is to make a budget. However, if you’ve struggled with a budget in the past or aren’t sure tracking your spending will work for you, you may be making some of the most common budgeting mistakes. Here are four of the most common budgeting mistakes, along with tips to get you back on track.
1. Forgetting About the Small Things
When budgeting we’re more likely to remember the big expenses, such as monthly rent or mortgages, groceries, gas, etc. While these things tend to be the most important, we often neglect some of the smaller expenses. Are you buying $5 of coffee every day? Do you go to the movies or out to eat on a regular basis? While these expenses may not seem like much in the moment, they are taking up more of your budget than you think. Make space for the important things in your budget, and decide what can stay and what should go. Remember however that just because you’re on a budget doesn’t mean you can’t have fun or do the things you love! You just need to be smart about it.
2. Failing to Keep Track of Spending Before Making a Budget
A common mistake in budgeting is not keeping track of your spending before you budget. If you don’t know what you’re spending currently, it makes it extremely difficult to plan for what you’re going to be spending in the future. When you’re just guessing at the data, it’s easy to have an unrealistic expectation of your spending and can often time cause you to fall short of your goals. Take some time to really understand what is coming in and out of your accounts, and make smart decisions based on data.
3. Don’t Make Unrealistic Goals Just to be Frugal
While we would all love to save as much money as possible, don’t make unrealistic goals that you won’t actually be able to achieve. Be realistic with yourself and with your money and don’t avoid the uncomfortable. If your savings goal isn’t exactly where you want it to be right now really take a deep dive into your spending and make cuts only where it makes sense. Maybe you only buy your coffee once a week, instead of 5 times a week. These small amounts can add up over time, getting you closer to your goals.
4. Not Remembering to Plan for the Unexpected
Our final most common mistake is not remembering to plan for the unexpected. So often we take our monthly income and split it up perfectly, and we forget to leave any wiggle room for unexpected expenses. Because life happens, it’s important to plan for any surprises. Give yourself some breathing room in your budget, and if you don’t use those funds in any given month, roll them into your savings!
Budgeting, when done correctly, can help save you time, money, and stress. By planning on where your money is going, it can help you have a clearer picture of your finances and can help you save towards your goals. For any questions on budgeting, get in touch with your local banker today!