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Budgeting Basics: Budgeting Mistakes to Avoid

Common budgeting mistakes

  1. Not Tracking Expenses: it's impossible to stick to your budget if you don't know where your money is going.
  2. Buying on Impulse: Impulse buying is expensive. 
  3. Becoming the Victim of Budget Busters.
  4. Being So Frugal It Makes You Miserable: you’ll binge later and throw all your hard work out the window. 
  5. Trying to Do Everything as Inexpensively as Possible.
  6. Not Asking for Help.

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Budgeting Basics: Budgeting Mistakes to Avoid

Budgeting Basics: Budgeting Mistakes to Avoid

https://www.investopedia.com/university/budgeting/basics6.asp

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Key Ideas

Common budgeting mistakes

  1. Not Tracking Expenses: it's impossible to stick to your budget if you don't know where your money is going.
  2. Buying on Impulse: Impulse buying is expensive. 
  3. Becoming the Victim of Budget Busters.
  4. Being So Frugal It Makes You Miserable: you’ll binge later and throw all your hard work out the window. 
  5. Trying to Do Everything as Inexpensively as Possible.
  6. Not Asking for Help.

Tracking expenses

One of the ugly truths about budgeting is that when you keep track of your expenses, it’s painfully clear when you’ve gone off track. 

Write it down when you’ve gone over your budget. The negativity you feel will help prevent you from overspending more or doing it again. Just think of this step as damage control.

Being frugal and miserable

If you try to deprive yourself too much, you’ll binge later and throw all your hard work out the window. 

A spending binge can set you back far more than treating yourself occasionally, so go for the occasional minor splurge. Just keep your treats within your spending limits and you’ll be fine.

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When budgeting comes in handy
  • You have no idea where your money is going.
  • You’re chronically overspending.
  • You’re not saving any money.
  • You struggle to afford the things you really want.
  • You...
Budgeting = creating a plan to spend your money

Budgeting is simply balancing your expenses with your income.

It's a plan for the coordination of resources and expenditures. When you budget your money, there’s a desir...

How to create a budget
  1. Gather Some Financial Information: gather a detailed list of your income and expenses.
  2. Select a Budgeting Method: figure out how you’ll budget your money to meet your most pressing financial goals.
  3. Create Your Budget: tally up all your expenses and income to see where you stand and allocate expenses.
  4. Execute Your Plan: you can use a notebook, pen and paper, a spreadsheet or an online software.
  5. Reward Yourself: you can work a small percentage into your budget to treat yourself each month.
The 70:20:10 budgeting method

This method suggests that you allocate 70 percent of your income to expenses, 20 percent to savings, and the remaining 10 percent to debt.

70:20:10 may work for someone with a healthy emergency fund and minimal debt.

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Making Your Budget Too Strict

Budget for the life you have. When you’re going through your budget and assigning spending categories, be realistic. 

Don’t tell yourself you’ll never buy a single discretionary i...

Budgeting for a Life You Can’t Afford

This becomes a problem when you’re spending for a life you can’t afford. It puts pressure on your budget and encourages you to live in a paycheck to paycheck cycle.

Assess your financial situation, cut back on your expenses, prioritize your money goals, and then come up with a new spending plan.

Budgeting Without a Purpose

It’s hard to stick to a budget that doesn’t have a goal.

When there isn’t one, your budget becomes an afterthought rather than a spending plan to reach your financial goals.

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