Learn how to get better at budgeting.

Some people give up on budgeting because they feel like it doesn’t work. Often their frustration is the result of pitfalls they’re simply not aware of. If budgeting is a challenge for you, check out these five common budgeting mistakes and learn how to avoid them.

Mistake 1: Not using accurate numbers

When creating a budget “close enough” is not good enough. To create a budget, you need to start with accurate numbers for your income and expenses.

Income is usually easy to calculate. Simply add up all your sources of income, including employment income, spousal and/or child support, gig income and any other money you have coming in.

Calculating expenses will take a bit more effort. The best way to know what you’re spending is to track every single purchase—no matter how big or small. A month or two of tracking will give you a clear picture of your spending habits. When you sit down to create your budget, combine your monthly and daily expenses with those that occur less frequently, such as insurance premiums, vehicle registration, annual dues and property tax payments.

Create a budget with accurate numbers and you’ll have a clearer path to reaching your financial goals. 

Mistake 2: Overlooking expenses

It’s easy to overlook small expenses and those that only occur occasionally. Things like cab fare for a night out, your child’s field trip, wedding and birthday gifts and splurges are easy to overlook when budgeting. The best way to get an accurate figure for all expenses is to track every single purchase for a full year. Count cash purchases as well as debit and credit card transactions.

Yes, tracking expenses can be tedious, but you can take better control of your financial situation when you know exactly where your money is going.

Mistake 3: Not involving other household members

Spouses and children have an effect on household spending. When both spouses are part of the budgeting process, you can work together as a team. With children, it’s not necessary to share all the details of your budget, but you can have frank conversations about the cost of household things. These conversations can help children better understand how their actions affect the family budget and establish good money management habits for when they become adults. 

Mistake 4: Going without an emergency fund

If you think an emergency fund isn’t necessary, consider the cost of borrowing money in an emergency. Many fall into a debt trap through payday lending services and credit cards with high interest rates.

Setting up a savings account for things such as emergency car or home repairs gives you a financial cushion when you need it.

Mistake 5: Putting off retirement saving

Consulting firm PwC estimates that one in four people have no savings for retirement and millions more are not saving enough for old age. This puts many people at risk for not having enough money to live as they’d like when they’re older. Plus, if you put off retirement savings you miss out on the opportunity for compound interest. Even saving a little adds up over time; reach out to us if you’d like help on developing a retirement savings plan.

Avoiding the mistakes above will help you control your spending and reach your saving goals. To learn more about budgeting, listen to our podcast on how to start a budget.

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