Do you have a budget? Maybe, Maybe not? Revealed in a recent Galup Poll, only 1 out of every 3 Americans has a written or digital budget. Knowing the importance of a budget, this is NOT GOOD! Guess what’s WORSE. The percentage of that 1 out of 3 that actually sticks to that budget.
[Read: Money Mistakes Young Professionals Can Avoid]
A debt specialist states that while mentoring hundreds of individuals that spent around 1 hour drafting their monthly budget, she noticed that by mid-month majority were scrambling to make ends meet. By this time, they were leaning heavily on credit cards or drawing from their savings to get by.
This is so common; we’ve probably all been in that predicament a time or two. Thought we had built the perfect budget for that month, but once it began to unfold, unexpected expenses, forgotten items, unexpected decrease in income, etc. And it really seems to happen time after time. Here are the top five budgeting mistakes that could land us right back where we ended last month:
- Calculating based on gross, not net
- Being unrealistic
- No ‘blow’ money
- Lack of self-control
Let’s see how these budgeting mistakes really weigh in…
1. Calculating Based On Gross, Not Net
Gross income is defined as an individuals or companies income/revenue before deducting any taxes or deductions. Net income is an entities income minus the cost of goods sold, expenses, and taxes.
This one rolls in first on the list of budgeting mistakes because it can easily be overlooked. Many of us find a little time to create our monthly budget but are still bogged down from everyday life pressures. It is easy for us to just multiply our hours and pay and start our budget from there; not even noticing that we’ve failed to establish our net income, and are accommodating for income that is technically gone before we get the check. Taxes, medical, dental, vision, retirement, etc.
Always remember to use net income and not gross income to avoid falling victim to this budgeting mistake.
Let’s say you do your grocery shopping each Sunday, and for a fact, you know you spend between $60-$80 every trip. You have calculated up your other expenses on your budget and only have a remaining $200 to spare. You go ahead and add $200 for your monthly grocery expenditure just for the sake of balancing your draft. This will not benefit you in any way.
Maybe it is not even that large of an expense. Now let’s say you go out at least once per week, your drive daily (gas), and every few days you need a little extra ‘wake up’, so you pick up Starbucks usually before work. Although these are not really pricey expenses, they occur regularly throughout the month; and oddly, many people forget to add these minor expenses to their budget and end up falling astray from their draft.
Talley up those little expenditures and avoid unnecessary budgeting mistakes.
More than you could count, you have probably encountered the phrase, “your attitude determines your altitude”. This not only applies to your day-to-day actions, it is also true for your budget. If you look at your budget in a negative light, always doubting the benefit of it and limiting the possibilities of it, you will most likely forever remain in dire financial constraints.
If you look at your budget as a beneficial, definitely doable thing, you will reap the most benefit from your positivity.
Some truly are unaware that their negative attitude is their biggest budgeting mistake.
4. No “Blow” Money
In America today, it seems like every day it’s something else. Flat tire, plumbing trouble, school pictures, nearly each month there is usually some sort of unexpected expense. Give your budget a little cushion by making sure to draft in blow money. If there is no blow money set aside each month, which means you are taking from your savings for every little hiccup. That’s not beneficial for anyone’s finances, how would you ever actually save anything. Don’t make the budgeting mistake of forgetting life’s hiccups and not planning for them ahead of time.
5. Lack of Self-Control
In some way or form, we have all lacked self-control during our lifetime. Some with food, some with drinks, many with their budget. This is one of the most common budgeting mistakes we could easily run into.
Often times we can have our bill money set aside, patiently waiting to be sent in. Then we go out or find something other than that bill to spend the money on.
It really just takes a good deal of will-power to avoid this budgeting mistake. Just put your best try forward because we all know how tough it is to maintain self-control.
[Read: Best Books about Debt That Will Help You Destroy Debt and Live a Rich Life]
Take a little quiet time to ponder and jot down your upcoming financial goals. Maybe you’ve always wanted an emergency fund, or possibly a vacation fund, either way, set yourself a goal to motivate you to stay on track. Also remember to avoid these ever-so common budgeting mistakes.
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