Budgeting Mistakes We Made & How To Avoid Them

Budgeting Mistakes We Made & How To Avoid Them.

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Budgeting mistakes are common and they often are the reason why budgeting fails.

Having a plan for your money is how you can reach and achieve your financial goals.

By doing so you’re looking ahead to what you’re going to do with your money before you get it.

This plan is formally and commonly known as a budget.

I personally prefer to call a budget a money plan.

Budgeting means different things to everyone.

But for the purpose of not trying to re-invest the wheel, I’ll stick to the common term.

This probably explains why some people make these common budgeting mistakes with their money plan.

Oops, I meant their budget.

Budgeting Mistakes

We talk to number of people about budgeting and helping them set up a budget.

This has enabled us to see patterns of how people approach their budget, and why they don’t work.

We don’t pass any judgement as no-one ever took a class on how to set up a budget and manage your money.

But more importantly, we don’t pass judgement because we’ve made these budgeting mistakes ourselves!

I don’t just want to talk about the mistakes for the sake of it.

I want to be transparent about our budget and the mistakes we made in our journey.

And I hope you can gain some practical guidance on how you can live well on a budget.

Let’s get into it.

Guessing Your Expenses

The first common mistake is guessing the numbers.

Numbers are the bread and butter of a budget. 

The fixed costs are the easiest to remember, it’s the variable costs where the guessing game begins.

We used to guess our food shop, our personal spending allowances and our fuel costs.

Guessing your numbers will render your budget ineffective as it’ll be a defective plan.

Plus it disables you from knowing how much you keep, which is the power of a budget.

I got this concept from the Richest Man In Babylon, it’s not about how much you earn it’s about how much you keep!

How To Budget Better

The root cause of guessing is simply that you don’t know your spending habits.

So the first step is to learn thyself.

Start tracking your expenses to learn what you do with your money.

Go through your last 3 months transactions and start adding up the numbers for each category. Every. Penny!

We’ve designed a Free Expense Tracker to get you started so no excuses.

Being accurate about your expenses will give you a clear picture of your lifestyle costs.

Above that, it enables you to make informed decisions.

You may decide to repurpose money from luxury non-essential expenses to go towards your financial goals.

Unrealistic Numbers

On the other side of guessing the numbers is setting unrealistic numbers.

With all good intentions, people will set up a budget with an effort to get in control of their money.

This control empowers them to start saving money, investing for the future or paying off debts.

The trouble is it’s easy to set unrealistic numbers to try and live to.

I remember when we tried to go from zero per cent savings rate to thirty per cent savings rate overnight.

Thirty per cent savings rate is an ideal goal to aspire to but not from the onset.

We found ourselves quickly transferring that money out of our savings when things got tight.

We had the ambition to save thirty per cent of our income, but we hadn’t made the right adjustments to allow that to happen.

How To Budget Better

When looking at your present-day position and your future desired position, think strategically.

Breakdown the journey from today to tomorrow in small steps.

If you want to stop living paycheck to paycheck as we did, start by saving realistic amounts.

Then each month or each quarter increase this as you go along. 

For instance, you may start by savings five per cent of your income then doubling it to ten per cent after 3 months. 

This is how you win in the long run as you’ll build the habit of saving.

Remember, a budget is a plan.

For a plan to be executed right it needs that right strategy.

Rome wasn’t built in a day, neither will your financial goals.

We want you to be equipped with the right tools to master your money and reach your financial goals. Our Ultimate Money Plan budgeting spreadsheet template has been designed to do just that!

Not Taking It Seriously

All plans need a clear purpose to succeed.

The purpose and vision behind the plan are what drives you and inspires you.

The trouble is, without deeper meaning you’ll struggle to take anything seriously.

Think about it, if you want to be debt-free but you have no compelling reason behind it you’ll stay comfortable in debt.

In the early days of our marriage, we knew we needed a budget but we never identified why.

So we had a budget on paper but it was far removed from our reality.

We’d actually go through the motions of writing the numbers on the spreadsheet and plan every penny.

Only to forget aout it the moment we closed the tab and went to YouTube.

And only to remember our budget near the end of the month when we’ve run out of money.

How To Budget Better

Take some time to think about why you’re budgeting.

I always like to ask myself why I’m doing anything at least three times.

Example:

• I’ll start budgeting, why?
• So that I can control my money and stop spending all of it, why?
• I want to start putting my mony towards things that matter to me like financial independence

By this example, financial independence becomes my why to have a monthly budget.

I would even go deeper and ask why financial independence is important to me.

But the point is, financial independence becomes the focus with budgeting being the action.

Financial independence is what empowers me to be serious about budgeting.

Taking It Too Seriously

Whilst taking your budget serious is vital, the opposite is also true.

Your budget is a plan, but don’t forget forget the small print at the bottom of all plans.

It’s subject to change.

As you’re putting your figures down and planning what you’re doing with your money keep this in mind.

This may not be popular opinion but it’s okay if you’re off-budget.

Life happens!

When we take our budget too seriously we genuinely suck the life and fun out of it.

Remember the point of budgeting is controlling your money not the other way round.

When something comes up in the real world your immediate response is, ‘it’s not in the budget’. 

Fair enough with a new pair of shoes but surely not £10 for takeaway after a long day?

There are many reasons a budget is amazing, but not living your life is not one of them.

How To Budget Better

Understand your budget and respect the plan.

However, if something comes up feel free to revisit your budget.

Review your budget and see if any changes and shifts can be made to meet any unplanned expenses.

If you go over budget don’t beat yourself down for it.

Just figure out what you need to do now and move on.

Take your budget seriously but not with a ‘life or death’ mindset.

Secondly, budgeting is a liefelong mission.

No one wants to do anything they hate or that demotivates the for long.

Keep the end in mind of why you’re budgeting.

But know making a small adjustment here and there doesn’t always mean you won’t reach your goals.

Not Having A Budget

Last but not least and absolutely obvious is not having one.

How can you succeed at anything without a plan?

Countless people make this mistake.

Some don’t budget because of misconceptions of budgeting.

Others would rather bury their heads in the sand and not face the reality of their finances.

Regardless of the reasons, this one mistake you absolutely want to fix straight away.

How To Budget Better

First, take some time to analyse the root causes behind that.

Unpack the reasons why you avoid having a budget.

It can be as simple as you’ve never done one before to it being scary and intimidating.

Knowing this will enable you to deal with the scarcity mindset that keeps your broke.

Secondly, just start.

There’s no magic formula or secret sauce.

You can build your own budget from scratch, buy a budgeting spreadsheet template or you use some other means.

You have so many options you’re bound to find one way that works for you.

Start your money plan today!

Take Action

Which of these budgeting mistakes resonates with you most? Work on that one!

Check out our Ultimate Money Plan to get in control of your money and smash your financial goals

Share this with your friend, family, or partner and encourage them to overcome their budgeting mistakes.

Let us know how you’re getting along by getting in touch with us, we’d love to hear from you

Knowledge is powerless without action

So take action, and take care

Thando