Budgeting Blunders: 5 Deadly Mistakes Often Made

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Financially Fit & Fab is now accepting guest posts!  This article was written by Stacy Barbee.  Stacy is a financial writer, blogger and content marketing enthusiast.  She uses content to vent her thoughts on money and financial issues through her site kissyourmoney.com!

Budgeting is mandatory for your survival. Period.

Budgeting helps you stay on track with your finances. Even though you may think you are budgeting like a pro, many mistakes can be made when making your first budget.  Check out these 5 deadly mistakes to avoid when developing a budget:

Budgeting Blunders-5 Mistakes Often Made

1. Ignoring Expenses:  Calculate how much you spend on your fixed as well as variable expenses.  Fixed expenses include housing, utility bills, transportation, student loans, credit card bills, etc…  Variable expenses include food, clothes, entertainment, and monthly subscriptions each month. Make sure to set realistic amounts for these expenses and even overestimate if necessary.

Your budget should be practical. You are normal! Leave room for a few luxury expenses in addition to your basic needs. Otherwise, it won’t take much time to blow your budget or swipe credit cards and aggravate debt problems.

Related: Budget like a Pro in 5 Simple Steps

 

2. Overspending on Wants: Financial moves based on whimsical decisions can break your budget. So, don’t make impulsive purchases. In fact, unsubscribe from email lists for online stores that will tempt you. These emails can be dangerous. If required, uninstall or disable the shopping applications from your smartphone. This way you can avoid temptations and impulsive purchases.

 

3. Neglecting Budgeting Tools: From templates to online applications, there are hundreds of ways to avoid budgeting blunders.  Whether you are using budgeting templates or online applications, make sure to keep the information up to date.  Change bank accounts?  Get a new credit card?  If you are using an online application, ensure to update the new financial information as it is received.

Budgeting apps are the preferred method of keeping track of income, expenses, and savings for many millennials.  There are a plethora of apps to choose from.  Check out this review of the budgeting apps and choose an app that serves your needs best.

 

4. Considering Gross Income: Your budget should be based on your net income or take-home pay. This is the amount that is left after deducting taxes, health insurance, and other payroll deductions. For instance, you might earn $50,000 a year. But, after deducting all the expenses, your net income is much less. Your spending plan should be based upon your take-home pay.

 

5. Ignoring Cheaper Options: One of the best ways to stay within your budget is to reduce expenses. You may feel like there’s hardly anything that can be done to slash the cost of other expenses such as utilities. But, this is a misconception. There are lots of options to reduce your utility bills, household costs, traveling expenses, etc. All you need to do is take the following steps:

  • Leading a frugal life

  • Comparing rates of various service providers

  • Looking for discounts

For more information regarding slashing monthly expenses, check out 6 bills you need to negotiate and steps for negotiating monthly bills.

Related: 10 Items you Should Slash from your Budget

Conclusion

Those who think that their financial life would be awesome without budgeting are hugely mistaken. It takes several months to create a beautiful house. It takes a lot of patience, planning, dedication, and determination. Likewise, it takes a lot of effort and work to build a strong financial house. And, budgeting is the first step you can take to erect a strong and robust financial house.

Think you have a solid budget? Before putting your current budget to rest, make sure you avoid these 5 mistakes often made.

 

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Have you made any of the above “budgeting blunders” or mistakes in the past?  If so, how did you fix it? Tell us in the comments!

 

Looking to get your finances in shape? Start with your budget first. Avoid this 5 huge mistakes.

55 comments

  1. I am definitely guilty of all of these! I find it so hard to make and stick to budgets. It’s a real problem!

    1. Budgeting is not too tough. Still, if you find it difficult, then you can use budgeting apps. Mint is a popular one. You can even use that.

  2. In the past we have forgotten to include my yearly credit card fee in the budget. We set some money aside each week in our curve ball account but since I do know that this expense is there I shouldn’t forget but I have in the past. I think that’s one of the biggest mistake people make is forgetting yearly expenses since they are so infrequent and sometime large in nature.

    1. Awesome Sarah! Those random annual fees can get you. At least you can now add it in your budget for future years.

    2. Right Sarah! This is why I feel budgeting apps are necessary nowadays. Mobile budgeting apps are good as you can update them 24*7. There are less chances of forgetting any expenses.

  3. I definitely neglect budgeting tools. I’m not sure if creatng my own excel spreadhseet counts, but that’s what I do. It works for the most part.

  4. Why do you neglect budgeting tools Kim? You should definitely use them. There are countless mobile budgeting apps. Just download and start crunching numbers.

  5. Budgeting is definitely an art and no one gets it perfect on the first try! I feel like I’m constantly tweaking mine. I love the tip for unsubscribing and deleting apps, avoid that temptation whenever possible!

    1. Yes, Erin. I have personally used this tip and gained from it immensely. It has helped me to restrict my expenses on shopping.

  6. My personal bank account monthly statement comes complete with a pie chart and spreadsheet with every penny I spend using my debit card. It has definitely been an eye-opener with budgeting my wants, fixed cost, and the big surprise food. I actually cook a lot. But, lunch during the week can add up quickly without even realizing it. Love this article!

  7. My husband and I did Dave Ramsey and it was so rewarding. Small changes pay huge dividends.

    1. Awesome to hear that Dave Ramsey’s program worked well for you! I love how he takes you through the full process and starts at the beginning.

  8. So true! I often forget to consider my gross income because hearing my net pay makes my salary even more depressing.

    xoxo, Jenny

    1. I agree with you Jenny! I never will forget getting my first “real job” and estimating my biweekly pay. Clearly, I had forgotten about taxes, insurance, 401k, etc… I was so disappointed when I learned my take home pay.

  9. Budgeting can be so tricky! Thanks for sharing all these tips. I really need to utilize budgeting tools more.

    1. Welcome! Yes, you should budgeting apps more. You can track your expenditures and find out how much you’re saving every month.

  10. I’m guilty of some of these blunders! Thank you for this article. Hopefully, I’ll be able to remedy my mistakes.

  11. This is such a great post to help refresh me when it comes to budgeting and actually doing so! I wrote a post ‘Blogger on a Budget’ where I challenged myself to budget and keep to it. I’ve managed to save but it’s still a work in progress – especially when it comes to those emails from my favourite brands tempting me ever so nicely to their newest items! Thank you for the tips!

    1. Just unsubscribe from those email lists. I know you’ll feel bad while doing this. But, trust me, this single step will help you meet your saving goals.

  12. Definitely agree with all these and especially #3. It can be hard to keep track of everything if you don’t have a good system in place.

    1. Yeah Amy! ‘A penny saved is a penny earned’. Budgeting helps you track finances, save pennies and build wealth.

  13. No. 4 – the income mistake – is a HUGE point that is so often overlooked. I try to factor that into any budget that I put together, even though it does tend to lead to a little more anxiety and stress over fitting all of the *wants* into the budget at the end of the day. It’s all good, though … with careful planning, all of those desirables will end up coming around to me sooner or later and I’ll appreciate them more since I’ve worked hard and never went into debt to get them.

    1. Have you ever asked yourself why are you terrible with budgeting? Where are you going wrong? Any idea? Use a budgeting app if required.

  14. Tia! Your tips are great. For years I’ve lived well (despite a low income), because I’ve learned how to budget carefully and but feed myself well. This week I’ve heading on my first holiday (in two years!) But it’s a month-long one so it feels pretty good. Until I get to a stage where I’m very comfortable I’m happy to live a frugal life – with a luxury here and there of course 😉

    1. Congrats on being able to take a break for the first time in a while! You are right that living on a budget no matter what your income is, is extremely important.

  15. I know I was getting bad with budgeting. Because I used to spend without keeping track of what was in my account. I do not do that anymore though.

    1. Great! You have taken the right step. Don’t repeat the mistake in future. Do you use any budgeting app?

  16. Great tips! I agree there’s always areas we can reduce expenses and spending, and I think it’s important to really analyze your spending before you can develop a good budget. Awesome post!

    1. True. Thanks Cara!!! A good budget is the one where you have done your calculations correctly.

  17. Overspending on wants is a problem for me! I needed to read this! Thank you for your voice!

    1. Thanks Joanae for your appreciation. I would be happier when you have used these tips and saved lots of money.

  18. I think #2 is a big temptation for all of us–but thankfully, it’s also easy to cut back in this area if we are aware of it!

  19. #5 is huge for me right now! I am so sick of wasting money and always looking to cut costs

    1. At least, you have realized your mistake, and that’s good. Stop wasting money on branded items. Start leading a frugal life. Use a CFL bulb at home. It will help you save on your electricity bill.

  20. I’m definitely not the best when it comes to budgeting. I certainly overspend. That’s something I’m beginning to work on.

    1. It’s never too late to make a fresh start. Practice makes someone perfect. You would too become a budgeting pro soon. Just stick to your budget.

  21. Good point about net income. I think it’s okay to use gross income, but you need to factor in taxes, health insurance, etc. into your budget, which is obviously an easy thing to forget to do because they aren’t nearly as visible as other expenses.

    1. Great point, Dave! Including net income isn’t bad as long as you don’t forget all the additional things factored in.

  22. Raising my hand ^ ^ Great points here. I enjoyed reading your post. This is a great reminder to all of us. It’s so hard when it comes to shopping haha ^ ^ but yeah gonna save more

    1. I am so glad the post was helpful Ayesha! If you budget on areas that are less important, you have more money free to shop. 🙂

  23. oh my word yes I’ve made all of these mistakes which is how I got into debt awhile back, I got out of it though, but we learn from our mistakes!

  24. My biggest budget blunder is underestamtig wants. I am so eager to save at time I don’t put enough money in my wants and then find myself falling short and taking the money from my needs or savings. It’s not ideal, but I am working on making a more realistic budget, especially during the summer months I want to allow for more financial flexibility.

  25. YES! I’m a huge budgeting nerd and I SO agree with these things – especially using tools! My husband and I have had amazing success using a budgeting app that we both access via our phones. Love it!

  26. Using the cash envelope system has really helped me. I’m a visual person and it helps me see that I don’t have as much money as I think I do.

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