Common Budgeting Mistakes That are Setting You Back Years With Your Money Goals – Part Five in Your Ultimate Guide on How to Budget Series
This is Your Ultimate Guide on How to Budget Series. Where Iay out every single thing that you need to know to successfully budget your money! No more guessing or wondering if you’re doing it “right”, after following along you will be 100% certain about what you need to do to organize your money!
– Part One: The Essential First Step with Budget Planning (it’s a must-do!)
– Part Two: The Best Budgeting Tips for Beginners (That You Have to Know)!
– Part Three: The Top 7 Proven Budgeting Methods – Your Perfect Fit is in Here!
– Part Four: Yes! Budgeting Can Actually Be Easy (With a Better Budget)
– Part Five: The 10 Most Common (and Costly) Budgeting Challenges That You Will Face (and How to Fix Them)
You’ve set up a budget, and this time it’s going to work!
This past month you’ve tracked most of your expenses, and you’ve mostly said “no” to things you wanted.
Come month-end, you’ve pulled up your credit card bill, and you are floored; you’ve overspent by $343! What?!
“What did I do wrong?
Let me help you figure out the budgeting challenges that are wreaking havoc with your monthly budget, and then let’s talk about how to fix it! I’m right here beside you, and we’re in this together!
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My Budget Failed! I suck!
Refinery29 quoted psychologist and co-director of Positive Change Guru, Gill Thackray. “Committing to something – be it a resolution, job, or partner is akin to making a promise or giving your word.
Failing publicly can bring on feelings of embarrassment and paranoia about what people will think of you going forward. Failing privately can often be even worse on the psyche as we really can be our own worst critics.”
Understanding this is so powerful; we are so hard on ourselves, SO HARD. We need to take a step back and analyze from a non-emotional state.
You will make mistakes, face challenges, and you will learn from those experiences! With your knowledge (and determination), you will tweak, adjust, and refigure your budget!
What’s important is coming out the other side. You will need to go through your budget, do some strategic planning, analyze your biggest spending categories, and then brainstorm how to fix them.
Top 10 Common Budgeting Challenges + How to Fix Your Budgeting Process
Budget Challenge #1 – You got frustrated and gave up
You’re not letting yourself be a beginner at this! You read all the info, and you checked your budget numbers twice even!
You should know by now that people make mistakes, especially when they are doing something new.
Can you imagine if you quit cooking as a teen because your box of Mac & Cheese was too watery? That would be silly, huh?
The Fix: Cut yourself some slack, and have a cookie. Read about how wildly successful people failed, chuckle, and have another cookie. Then tomorrow morning, come back to your budget planning process and figure out where you went wrong. Sometimes you’re super focused on one point that you overlook key challenges that are dragging your numbers down.
Budget Mistake #2 – You totally blew your budget numbers and overspent
Let’s say you gave yourself $400 for groceries for the month, for you & hubs, and your two growing kiddos. $400 sounds like a lot, but it really wasn’t enough for your family. You just weren’t realistic enough with your budget numbers in the beginning.
The Fix: You need to go back to your three previous months of spending and see how much you actually spent on this category on average. If you find out that you averaged $800 a month on groceries, then no wonder you couldn’t keep to the $400 budget! You need to cut your expenses strategically, and sometimes that means cutting down a little bit every month.
Your best bet is to take your original amount and take it down by 20%, which in this case would be $160 less on food, and if you make that, then great! Try for another 10% decrease next month, and then get to a place where the numbers balance and it’s a more realistic budget.
Remember, the goal is progress, not perfection!
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Common Budgeting Challenge #3 – All of these things kept popping up that you had to spend money on
So you set up your budget with numbers that you’ve averaged over the past three months or so. Great! Looking at past trends is a great way to guesstimate your future spending habits. But did you look ahead? If you had looked forward, you would have seen that your brother and your dad had birthdays and that your annual Prime Membership was up for renewal. Oh, stink! Planning ahead, also called forecasting, is key to budgeting!
In my Trello calendar, I put a reminder one month out from my family member’s birthday, so I know that I need to account for that when planning my next month’s budget. So if we’re taking Dad out to eat for his birthday (he usually doesn’t want presents), then I know I need to find $80 somewhere from the budget.
Or maybe soccer season is coming up, and your little girl needs to pay for fees, uniform, and team pictures? All of the different & random expenses can get out of control.
The Fix: Setting up sinking funds can be a great way of handling these one-off purchases! With this type of framework, your regular monthly budget won’t take a hit, which is great! Yet, it may take a few months to get to the point where you can layer in sinking funds to your budget planning process.
Remember, everyone starts at the beginning!
I am slightly in love with sinking funds; they are the primary way that we pay for the things we really want (i.e., vacations) and pay for unexpected expenses (i.e., car repairs). I use a Pay Yourself First method into my sinking funds in order to be able to afford “almost anything.” Remember…
You can afford anything, but not everything!
Seriously, I have budgeted this way for the past four years, and it totally works! Click the button below to get your free budget template and worksheets!
If you’re not at the sinking fund level, then you need to pay really close attention to what expenses are coming up in the next few months! Ask your kiddos and your partner, “what cool things are coming up?” Then write it down in your budget planner.
Budget Mistake #4 – You’ve never been more miserable!
You viewed your budget as a total bummer! Oh, this is an easy trap to get stuck in, and that’s precisely what it is, a trap.
You viewed your budget as a total bummer! Oh, this is an easy trap to get stuck in, and that’s precisely what it is, a trap.
We talked about how important your mind game was in the first post. Go back and check out Your Ultimate Guide to Budgeting: Part One -What You Have to Do When Planning on Starting a Budget.
You need to see your monthly & annual budget as a way that you are finally taking action on your goals! Which is an amazing thing! Your budget isn’t holding you back from fun; it’s moving you forward with the things you identified as being extremely important to you!
The Fix: Go back and look at your goals, and revisit how having control over your finances will bring you closer to those goals. Be it owning your own home or finally being able to stay home with your littles.
It all ties back to money in some way or another. Look at your financial goal and recommit. Maybe you decide it’s not worth it? Then it’s time for more compelling goals!
The key to successful budgeting is to figure out what is super important to you by identifying your Personal Core Values. Here’s what I have identified. You’ll notice that “security” is one of them. I want always to be sure that my daughter will be taken care of, which includes leaving her funds to live off of after my husband and I aren’t here to take care of her. She is my Financial Why!
Budget Challenge #5 – You couldn’t remember how much money you had left to spend, so you just went ahead and spent. Like a lot.
Now you don’t need to be the OG clutter fighter Marie Kondo here, but you do need to be able to find your budget planner, your receipts, and your calculator, and since that’s on our phones, we’re golden on that!
Being organized also means that you have routines in place to track your spending and review your financial numbers regularly. Once every few days is ideal. Once a week is the absolute minimum.
Why so often? Well, if you overspent on September 14th and you wait until the end of the month to track everything, then there is no room for you to trim and course-correct by month-end.
The Fix: You need to get organized! Put all your budgeting stuff in one convenient spot; having a budget binder is a great resource for this. Open up your calendar and schedule 1 hour on a Saturday morning or whenever during the week that you have dedicated quiet time for you to review things. Mark it on your calendar, and don’t break the date! Remember, the promises that you make to yourself are the most important ones!
Another organizational mistake is that all of your money is pooled together. I mean, it sounds nice and straightforward. But what happens is when you have some money allocated for vacation, some for back-to-school clothes, and some for grocery shopping, you’re never 100% sure what each dollar is for. Oh, and you lost your paper budget (or you deleted your Excel budget). Yikes!
You need to separate your money into different bank accounts! My husband and I have eight bank accounts, and it makes things SO EASY!
Each of our significant/permanent sinking fund categories has its own savings account. That way, we know what every single dollar sitting in our account is for, no confusion, and no room for “interpretation.” If the account says “Car Fund,” then that’s what that money is for, NOT for a new set of golf clubs!
Yes, separating your money isn’t a traditional budgeting method (but the traditional way hasn’t done Americans much good, has it).
Budget Mistake #6 – Everything is a “need”
This is the hard part; I know it. So many times, I have just HAD TO HAVE IT! It wasn’t that it was a “want,” It was an I “needed” it.
You don’t need that super cute wrap sweatshirt from Athleta, and you don’t need a Venti P.S.L. (or even a tall one). You need to be honest with yourself. Like stone-cold honest. It will be uncomfortable, and you may get defensive, but this will be the only way to break through and gain traction with your budget!
The Fix: Know your spending triggers! Are you bored, hungry, or feel bad that your kiddo told Daddy that they loved him more than you? Or do you just want to treat yourself?
Whatever “it” is, you need to think about it, identify it, and label it as a want and not a need.
- Driving home late and you’re hungry, oh nice, there’s a McDonalds! Nope! You should have snacks stashed in your car; you’re a mom, of course, you have snacks! I purposefully have KIND nut bars in my car door pocket, like 12 of them?
- Wandering Target because you forgot your list? Get up to the front of the store and take four items out of your basket. Just give them back to the cashier, or even dumping them in an aisle, is better (#noshame) than buying them when you know you don’t need them.
- Your honey canceled on date night to hang with the guys, and you’re super bummed? Online Shopping anyone? Take your credit card info off of the sites you frequent, and close your online accounts. Make a promise (pinkie swear) that you’ll put items in your online cart and leave them there for three days before finalizing the purchase.
Be honest with yourself. It’s simultaneously the easiest and the hardest thing to do, but it gets better with practice and patience!
Want some evidence that this is a problem? Nerdwallet found that “Credit card balances carried from one month to the next hit $466.2 billion in December 2019, according to our annual analysis of U.S. household debt. Credit card debt has increased by more than 7% in the past year and almost 37% in the past five years.”
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Budgeting Challenge #7 – Your family is complaining that you’re no fun anymore
Ouch! This is hard, but just because you want something it doesn’t mean your kids will understand it, or that your honey will be on board. It may feel like they don’t care about you, or they think that you’re being too controlling.
We need to open up, and depending on your kiddo’s age, you’ll need to filter the whys and frame it in a way that they will understand. Even if kids say they understand, they may need some reminding when they get the urge for the latest & greatest toy.
Hopefully, you sat down with your SO before starting this plan, and you talked about what you each want for your whole family. You brainstormed ways together, and you came up with a plan together; you each identified how you could help this process be more cohesive and go as smoothly as possible.
Or you didn’t.
Depending on how you have previously rolled, giving up authoritative power to being a team player may be tough. But it’s also necessary. Even if you know, and they know that this is the best course of action and it’s what needs to happen, people still want to be involved in the decision-making process.
People don’t change because they were nagged to death; they change because they were inspired!
The Fix: Sit down with your SO, and talk about why you made the decision/change. Talk about your feelings and your goals for the family. Then apologize for not including them, and then completely be quiet and let them have their say. Don’t interrupt, don’t challenge back. Just sit and listen.
If you did include everyone in the decision-making process, and they still didn’t uphold their end of the bargain because they bought a new lawn trimmer at Home Depot (no, it wasn’t on sale, and yes, you already have one in the garage). Then they have some thinking to do. Maybe they’ll even think about returning it?
One thing that we do for our family finances is that we each get to keep 5% of our own paycheck for us to do whatever we want. This is above & beyond our regular spending allowance. I know 5% doesn’t seem like a lot, but it adds up faster than you think!
If I want to save for a solo vacation (my fav), then I have this money and whatever else I don’t spend from my monthly allotment of spending money! I don’t question my hubs on how he spends his 5%, and he doesn’t get to poke holes in my 5% spending either.
A great way to get the family involved is to do a money-saving challenge. A challenge is a great way to make saving money “exciting.” You can start small and work your way up to a no-spend month or a 52-week savings challenge!
Personal Budget Mistake #8 – Your car, dishwasher & house totally broke.
You had to spend a fat chunk of money to fix it, and now your credit card is steaming from all that swiping! That super stinks, and I’m sorry. It sucks to take two steps forward and then a big fat bellyflop backwards.
I have to agree with money guru D.R. that each family needs a $1,000 emergency fund before tackling any other financial goals. This money should be on hand and ready for when your car breaks or your fridge goes out. Whatever the emergency, you need to prepare for it. Because it will happen.
Why do you need this first? Let’s say that you’re paying down debt, you pay off your card, and then your washing machine dies a sad and tragic death. There’s no point in paying off your card when you’ll just reload it with another high ticket unexpected expense. You’ll be back at square one all over again, and that is one of the most demoralizing feelings!
The Fix: Having cash at the ready keeps you from taking on more debt, which can be suffocating and ruin your mojo. You don’t want to lose motivation! Yes, paying cash still stinks; the money is gone. But it’s not “debt,” there’s a significant mental difference.
If you don’t have an emergency fund yet, the first step in your budgeting process should be to start setting at least 10% of your income aside to get this up to $1,000. Once you reach that goal, then you can allocate that money to paying down debts or maybe increase your savings to 20% and use some of it to set up your sinking funds.
In fact, you can quickly set up an emergency fund or get some money into your sinking funds by…
- having a garage sale
- selling items on eBay
- babysitting for your friends
- selling clothes to thredUP, which is super easy! You box everything up, print a label online, and ship it!
Remember, your emergency fund is there to save you when the shiz hits the fan! Like if you lost your job, or your house burned down (you should have insurance too), or if there was a recession and everything stopped, including your job!
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Budgeting Challenge #9 – It’s totally not working; this is stupid!
You might have picked the wrong method of budgeting. This one, while it stinks, can easily be fixed. Let’s say you wrote out a monthly budget, but you used your average monthly income and not a budget designed for those who have irregular income. That’s okay; just switch it next month. It wasn’t a failure; it was only a hitch. Again, just don’t quit!
The Fix: Go back to Your Ultimate Guide on How to Budget: Part Three – The Top 7 Budgeting Methods to Choose From and look to see which other budgeting methods may work better. Give it a shot, and if that doesn’t work, try a different one, or reach out for help. You can always email me and ask questions, or you can hire me to do a full-budget review for you.
Be sure to join a real “community” with the same goals as you! There are tons of Facebook groups to support you and answer your questions! Sometimes a fresh pair of eyes on things can shed new light (and hope) on your budget and situation.
For the very brave, people sometimes list out all of their expenditures and ask for advice on what to cut. For you, having an XYZ may seem to be a necessary expense, but to others, it may seem like a luxury that can easily be cut. Be open to new ideas, and be ready to receive some feedback that you may not like. Yet, it’s a valuable experience.
Common Budgeting Mistake #10 – Ugh! None of it made any sense, so you gave up
I hate to say it, but it was probably too complicated. Not that you’re not super smart (you totally are). But people like to overcomplicate things to make their thing seem more “complete” or better.
Now with a budget, you need to include “everything,” but that doesn’t mean that your budget should be 82 pages! Yes, you can have supporting documents like your Expense Trackers, Your Debt Snowball Plan, and Savings Goals, but your actual monthly budget should be one page, no more and no less!
The Fix: Let’s K.I.S.S.? No silly, not smooches! I want you to Keep It Simple Stupid (I apologize about the “stupid” part, it’s just part of the acronym).
Seriously, when you overcomplicate things and have a bunch of unnecessary info, it just ends up taking more time, and there is more room for error. Let’s remove the time wasters and the confusing stuff and focus on only what’s needed!
Sometimes going back and rereading “the basics” can really help. There are many times when I thought I knew a topic, but I read something at a certain point where it just clicked, even though I heard it before. So starting with the basics of budgeting can sometimes be very helpful.
Or maybe you just learn better in a different way? Some people are visual learners, some by reading, and some by doing both. Try some different learning methods to see which way works best for you! Check out VeryWell Mind to see how you can tweak things to help you learn faster and easier!
I have created a free printable document just for you! It’s my one-page budget template, along with some helpful budget worksheets for you to really dig deep and strategically plan your money goals! You can use all the sheets or just the one-page budget template. Click the button below to get it! (Remember, it’s FREE!)
Bonus Budgeting Mistake – You don’t celebrate!
What? Celebrate? That sounds a lot like spending money. You’re right; it is.
The Fix: You need to plan to have a little bit of room to bring some fun into your life! You can totally buy a celebratory cupcake because your daughter is the new Captain of her soccer team! You just need to write it into your budget.
At the same time, you need to celebrate your budgeting wins! No matter how small, progress is progress! If you underspent your gas allowance by $25, then split that amount in half, put $10 into your savings, and spend $15 on some ice cream, hot fudge, and whip cream at the store and have an ice cream sundae party for the whole family!
Deprivation is a sure step toward an explosion; it’s just a matter of when the explosion will happen. So let’s head this off and plan in some fun money (again forecasting). You might think that this sounds lame or take the element of fun and spontaneity away. Think about it this way; it takes the guilt away, and I am all up for that!
We’re Moms; we don’t need any more guilt.
At the end of the day
I want you to know that a budget is like any other learned skill (walking, playing chess, eating with your toes). Whatever your ability, you had time to learn and practice it. You failed at it, you adjusted, and you tried it again. Budgeting is no different. Don’t let your budgeting challenges and mistakes get the best of you!
You can do this! Make your financial goals a priority! You can, and you will!
I’ve always been a fighter. If you tell me I can’t, I’ll die trying to prove you wrong.
I’ve always been a fighter. If you tell me I can’t I’ll die trying to prove you wrong.