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Budgeting goes a long way. But it only works if you budget right. Surprisingly, many Americans don’t know how to budget. And those who do overspend.
According to a survey, 84% of respondents with a budget have overspent at least once. There are some things you can do. We focused on errors with simple solutions to compile this list of common budgeting errors. These are the ones I’ve also experienced myself.
Here are 14 common budgeting errors that keep your wallet empty.
1. Not Tracking Spending
Probably the most common and painful error is not tracking your spending. How can you create and follow a budget without reviewing your spending? This doesn’t mean you have to check your bank account every day, but at least once a week. I like to write down all my expenses after the month is over and categorize them. There are even apps that do this for free.
2. Forgetting to Budget for Groceries
Groceries are complicated. It’s really easy to set a random amount for groceries and overspend. Some people even forget to include groceries since they aren’t a set amount. Forgetting your groceries can leave you tight. It helps to create a separate grocery budget.
3. Not Factoring in Utilities
This might be too specific for you, but it’s worth a mention. I live in an apartment. Utilities change a lot and aren’t included in rent. Underbudgeting for utilities, or outright forgetting them in a budget, can disrupt your month. Always aim to budget for utilities on the higher end. If you pay $100 to $150 in electricity, set aside at least $150 monthly.
4. Lacking Emergency Funds
One way to keep living paycheck to paycheck is to neglect growing savings. It isn’t easy. Most Americans live paycheck to paycheck with less than $2,000 in savings. When budgeting, don’t forget to set aside some money for savings. Even $20 a month adds up.
5. Creating Unrealistic Goals
Another way to keep your wallet empty is to set unrealistic goals. Unless you’re making a lot of money with limited expenses, you won’t be able to save $5,000 a month. Set realistic and small goals. It’s way easier to budget for small goals. If you’re looking to build your savings, aim for $100. After this, bump your goal up to $500.
6. Using Too Many Cards
Technically, this common error is connected with not reviewing your spending. Using too many credit cards can be confusing. It’s easy to miss a payment when you have multiple accounts. Personally, I only use two cards. It makes it easier to track.
7. Not Writing Down Your Budget
Budgeting in your head is not good enough. It’s easy to forget an expense or important bill. Everyone is different. You don’t have to write it physically down. You can also track your budget digitally in a spreadsheet or through an app. I’m old school. I like using pen and paper.
8. Not Reviewing Your Budget
Reviewing your spending isn’t enough. You should also review your budget. This common error can lead to costly mistakes. Forgetting when a bill is due isn’t uncommon. Most companies charge late fees for missed payments. Again, you don’t have to review your budget every day, but once a week is ideal.
9. Impulse Buying
I’m guilty of impulse buying. It happens, and we aren’t alone. Over a third of Americans admit to impulsively buying products. Once in a while, impulse buying doesn’t hurt. However, if it’s frequent, you’ll need to rethink your budget. It can help create a budget fund for fun/impulse purchases.
10. Forgetting Holidays
Set bills and savings aren’t the only things you need to budget for. Holidays come up frequently. Birthdays, anniversaries, baby showers, and weddings often require gifts. These important days have a way of sneaking up on us. I always recommend saving for holidays and one-time purchases. This should be separate from your emergency savings.
11. Budgeting Too Tightly
There is no rush to meet your goals. I know it can be tempting to limit your spending, but this can backfire. Budgeting too tightly is a common error that leaves people broken and burned out. We can’t predict everything. What happens if you need to spend more money than you initially thought?
12. Keeping up with the Joneses
There is no need to try and keep up with the Joneses. Honestly, most people are in the same boat. But just because your friends buy new outfits or attend concerts doesn’t mean you have to join them. One-time purchases outside of your budget can come back to bite you.
13. Giving Up
I consider giving up a budgeting error. Giving up a budget isn’t uncommon. Burnout is real, and it’s tough. Money is stressful! This is why it’s important to give yourself grace. Be kind to yourself. Mistakes happen, and budgets need to be tweaked all the time. Let yourself change budgets as needed.
14. Guessing Costs
I don’t recommend guessing your bills or the cost of an item. When setting up your budget, try your best to pull up all the necessary documents. Sure, being off by $10 is not a lot, but multiply this by five, and it’s a lot more. Not everyone has a lot of wiggle room either in their budgets. If this is you, try to be as exact as possible. In my budget, I round up as much as possible.
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