Five Common Budgeting Mistakes (And How To Avoid Them)

Budgeting is a crucial skill for financial stability, and just to have your shit together. Yet many people struggle with it due to some common budgeting mistakes. Over the years I’ve made most of these mistakes myself so you’re not alone.

By steering clear of these mistakes you can take control of your finances and work towards your goals.

Overestimating your income

If you have a standard 9-to-5 job without any additions this may not apply to you. But if you do overtime, earn commission or get regular bonus’ don’t make the mistake of overestimating your budget.

We can’t rely on inconsistent or variable sources of income, and relying on them can leas to overspending or strain on your finances.

When budgeting only consider your guaranteed or regular income. If you get anything extra then this is a happy bonus.

Common budgeting mistakes: forgetting non-fixed expenses

It can be quite easy to focus on fixed expenses which don’t vary month to month. These types of things tend to be living expenses like mortgage/ rent, utilities and subscriptions. But forgetting about variable expenses such as eating out or entertainment can derail your budgeting efforts pretty quickly.

Once you’ve tracked all your expenses for previous (both fixed and variable) you can allocate money according to your budget.

Me and Luke have a takeaways/ eating out pot so if we do fancy something we know we have some money set aside for it. And we don’t have to figure out where we’re going to get the money from or put it on the credit card.

Not having an emergency fund

One of the most common budgeting mistakes is forgetting to save into an emergency fund. Unexpected expenses can quickly eat away at any savings or cause you go into debt. To avoid this make sure you save into an emergency fund every month. Life’s expensive at the moment so you may not have much spare income but every little will help if/ when you ever need it.

The end goal would be to have at least three to six month’s worth of living expenses easily accessible.

If you want to read more I’ve written a post on how to start an emergency fund, and why we put our emergency fund into premium bonds.

Common budgeting mistakes not reviewing

Everyone’s budget is going to be different, and your own budget will change over time. You can spend time setting up a budget but you need to review it on a monthly basis and make any necessary adjustments.

Your priorities may change over time, or a new goal might become important to you. You may also find your financial situation changes. So set aside time each month to track your progress and amend anything before it catches you off-guard.

Budget your savings

Don’t forget about your savings, factor these into your budget. If you don’t then it will be much harder to reach your financial goals.

We have a lot of smaller sinking funds along with larger savings and these are only on track because we prioritise them into our budget.

Think about your financial goals and what you want your money to be able to do for you.

Learn from these common budgeting mistakes

As I mentioned at the start I’ve made most of these mistakes before. And chances you will too. But as long as you learn from them and move on it’s okay.

Budgeting is an important tool for achieving financial stability and reaching your goals. At the end of the day it’s your money and you want to be in control of it.

Have you fallen foul into any of these common budgeting mistakes?