1. Not making a budget
Do you ever feel like you don’t know where you money is going? A budget can help you do that. The first time you make a budget, it’ll take you about an hour. Now my budget takes me about 10 minutes. Most things don’t change month-to-month so there is very little that changes each month. Once you work out the kinks, creating a new budget is pretty quick. Is financial security worth an hour a month? You could do your budget while watching TV.
2. Making a budget but not living by it
When you make a budget and stick it in a drawer, you might as well not make one at all. You just wasted 10 minutes of your life. Managing your budget doesn’t have to take long. I spend about 15 minutes per week updating my check register and paying bills that are not set up automatically. I have a spreadsheet set up in Google spreadsheets that I use as my check register so I can access it from anywhere.
3. Not having a goal
It’s extremely difficult to stay on budget if you don’t have a goal. Set a goal. It could get getting out of debt, saving an emergency fund, saving for retirement, saving for a car or a vacation. Whatever your goal is, get it down on paper. Put it on your wall. Keep that goal in the front of your mind. It makes it so much easier to stick to a plan.
4. Not working with your spouse
When we got married, the official said, “And now you are one.” We went from “his” and “hers” to “ours”. We made decisions together. If you can’t share common dreams and goals, how can you develop a plan to get there? Don’t start with the budget. Start by discussing what you want your life to look like. Once you agree on that, it’s easier to develop a plan to get there, together.
5. Planning for tomorrow when you can’t survive today
I see this all too often and it frustrates the crap out of me: people who are saving for retirement or purchasing company stock but can’t pay their bills. The argument I always get is “well I’ll need money for retirement!” You bet your life you will because you are going to need it to pay off all that debt you are accumulating today! If you take a few years off from retirement saving to get your mess cleaned up, you’ll easily be able to put 15% of your income into retirement each year. You’ll free up cash flow and end up with more money in the end. Don’t cut off your nose to spite your face!
6. Creating a budget so tight you go insane
This is often the one that kills budgeting for most people. The reason that people think budgets are restrictive, terrible, horrible, no good, very bad things is because they make their budgets that way. How do I know that? Because my husband and I did that when we first started. Our budget was so tight, after a few months we completely fell off the deep end and bought anything we could get our hands on. I’m talking stupid with zeros on it. Budget yourself some BLOW money. Remember that you make this budget. You can put what you want in it. Don’t build it the way I think you should or the way someone else thinks you should. You need to build your budget the you can live with it. The first goal is to track your money.
7. Trying to do too much at once
I mentioned goals earlier. Some people have lots of goals. Saving for retirement while trying to get out of debt and save for a new car, while also trying to buy a house will get you nowhere. Pick a goal. Stick with that goal until you accomplish it, then pick the next goal. Rinse, repeat as needed.
8. Trying to create a one-size-fits-every-month budget
When we first started budgeting, we thought we could make one budget and then reuse it every month. That did not work. Things change. Life changes. Budgets should to. I start with the previous budget and update it for the current month. I add in the actual utilities for the month and add any items that might come up in that particular month, like the quarterly water bill or semiannual auto insurance payments. There are also things like weddings, showers and birthdays that might need to be added to the budget. Budgets are also flexible. If something happens during the month, sit down with your budget and adjust it. Decide where the extra money will come from. Remember, this is YOUR budget.
9. Believing that the only way to work your budget is to decrease spending.
Jeff and I have cut our budget a lot. We don’t have cable TV. We keep the heat down. If I cut the grocery budget anymore, Jeff’s going to start an anti-vegetarian protest. We realized that if we want to pay things off faster, we needed to increase our income. We both have side businesses that bring in extra money. Think about what you can do to make some extra cash. Walk dogs, mow lawns, shovel snow, do repairs for folks. Think about the skills you have and see how you can apply them to make extra cash.
10. Believing that it can’t be done
When I asked readers the first word or phrase that came to mind when they heard the word “budget”, many people responded with various forms of hopelessness. I remember that feeling. I remember thinking we could never get out of debt. I remember thinking we would be broke forever. I remember thinking that payments were normal and someday they would just go away, that credit cards were a way of life. I also remember how it felt when we built our thousand dollar emergency fund. It was like a 2-ton weight had been lifted. We made a lot less money then and that was a huge accomplishment. Then we paid off the first credit card. It wasn’t huge but that little win helped propel us to where we are today. Will it be easy? Probably not. But when the stress of payments is stronger than your desire for stuff, you can get there. We still have a long way to go in our debt-free journey and it’s not always easy, but we have so much more peace now. The financial stress is gone. We have a plan and we live by it.
What mistakes did I miss? Add your own in the comments.