Just about everyone who budgets makes mistakes from time to time. If anyone disagrees, they’re either fibbing, or they simply haven’t made that first mistake yet. But I promise that eventually, it will happen.
For example, when my husband and I were first married, we accidently entered one of our paychecks twice. I’m sure you can imagine the unpleasant surprise that soon arrived in the mail.
At first I couldn’t figure out why we’d gotten an overdraft notice. However, after some digging I discovered the double entry error (keep in mind this was several years before the internet and apps were available to help). Needless to say, I transferred money from savings to checking and made the necessary corrections to our budget.
Of course, as a first time budgeter, I didn’t know all of the money mistakes to avoid. To keep you from making budgeting mistakes that could be prevented, here are some tips.
1. Not Allowing Flexibility
A budget that’s too rigid will be difficult to stick to for a first time budgeter. Allow yourself some flexibility so you can stay on track. One way to do that is to make a small line item for discretionary spending.
2. Failing to Save for Emergencies
Another pitfall for the first time budgeter is failing to save for emergencies. Naturally, building an emergency fund is hard if your income is limited. Save something regularly for future money emergencies – even if it’s only $5 each week.
3. Forgetting Irregularly Occurring Bills
Recently my husband thought he’d forgotten to pay our property taxes, which were due over a month ago. This bill isn’t one of the regular bills we pay monthly, making it an easy one to forget about. He was pretty worried about it, but luckily, he’d paid it already and it just slipped his mind.
This potential money mistake could be avoided by using an app to keep track of all of your bills. There are plenty on the internet to choose from. Check them out and try one on a trial basis to find the right one for your needs.
4. Budgeting Too Low for Fluctuating Expenses
Some monthly bills are based on usage, such as electricity and water. These bills can be more difficult to budget for if you’re a first time budgeter.
To handle those bills easily, budget for the highest amount you’ve paid in the past. Whenever the bill is less, sock the remaining money into your emergency fund. If the bill every goes over the amount you budgeted, take it from your emergency fund and cover the bill.
5. Putting Off Budget Updates
Like many other things, budgets need to be adjusted once in a while. As other businesses increase their prices, your monthly bills will go up.
If your budget isn’t keeping up, you’ll constantly be over budget without knowing why. You can keep this money mistake from happening by re-evaluating your budget at least every six months.
6. Neglecting to Look for Free or Cheap Substitutes
At times, first time budgeters might make the money mistake of neglecting to look for alternatives. Free or cheap substitutes are sometimes available to replace services you currently pay for.
Choosing multiple, lower cost substitutes, like generic food over name brand, can save you hundreds if not thousands per year. They can also keep you from overspending your budget each month.
7. Assigning Wants as Needs
It would be wonderful to include everything you want in your monthly budget. For most people, this isn’t an option because their wants exceed their ability to pay for them. That means you have to make the hard choices when you budget. Not everything you want can be classified as a need.
As you can clearly see, there are plenty of money mistakes you might make as a first time budgeter. However, using these tips, you’re sure to avoid at least some of them.
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What other money mistakes should you avoid as a first time budgeter?