Budgeting, when done right, is the most awesome tool for erasing debt and building wealth. But many people do it wrong and then quickly fall out of practice. Here are The 5 Most Common Mistakes for New Budgeters.
1. “Forgetting” To Include Everything
One of the biggest mistakes first time budgeters make is to not include every single instance of money coming in or money going out on their budget. In fact the expense side, or money going out, will usually contain the most mistakes. When you are not use-to tracking all of your expenses and budgeting for them, it is easy to overlook them when it comes time to write them down.
And many times your mind tries to play tricks and pretend a bill doesn’t exist. Denial. Your brain tricks you into thinking that if you don’t acknowledge a debt then it does not exist. Trust me, it is still there.
This will become easier as time passes and you have been budgeting for several months. Soon you will get to know each of your bills by heart. But in the beginning it is easy to over-look something. And easy to forget something if your mind is playing games with you. Do not leave anything off your budget. Include it all.
2. Over-Complicating It
The next biggest mistake is that people either purposely or not try to over-complicate the budget. There are 200 categories, and each category has its own subcategories, and those sub-categories refer to other budgets. Or your categories do not even apply to your lifestyle. If your kids are older there is no need to have a category for day-care on the budget.
Make sure your budget is clean and free of any extraneous categories. Your budget should be customized to you and not the person before you who gave you the budget form.
3. Not Changing With the Times
Another mistake made is people do not modify their budget over time. No two monthly budgets will ever be the same. So don’t try to force a one-size fits all mentality into your budget. Your December budget will be very different from your June budget. Make sure you take that into account.
Sit down and rework your budget each and every month to customize it to that month’s budgetary needs. This doesn’t have to take a long time. You should be able to do this in 10 to 15 minutes once you have been budgeting for several months.
4. Using Tools You Are Not Familiar With
Another pitfall of new budgets is made when folks try to use tools they are not familiar with when creating their budget. If you are technically challenged then do not buy a $100 budgeting program for your computer that you will never fully understand. All it will do is create frustration and lead to you not using your budget.
And if you are not good with Excel, don’t try to force your budget into a spreadsheet program. Again all you will end up doing is causing yourself grief and giving up before you have really had a chance to do it right.
There is nothing wrong with the old-fashioned pen and paper when creating a budget. Sit down, and write it down. It is simple and doesn’t require you to understand 3 programming languages to add up 1 + 1.
5. Not Sticking With It
Finally, the last mistake folks make is not sticking with it. Or just not continuing with their budgets. If you don’t use a budget, you will not get out of debt. And if you just stop, it gets harder and harder to get back on track. You need to be able to train yourself to take a few minutes per week or per month to review your budget, edit it, and follow it. A budget will do you no good if it is just sitting in some junk drawer in your kitchen.
So avoid these 5 big budgeting mistakes and continue to erase debt and build wealth.