10 Common Budgeting Mistakes

by Aaron May

A detailed, written budget is a vital part of a healthy financial plan. When done correctly, a budget serves as a blueprint for our money. It gives us the power to decide where every dollar is spent, including how much we put into savings, set aside for emergencies and future purchases, as well as planning for retirement. However, many of us leave out key elements of an effective budget. So let’s examine some of the common mistakes we encounter when planning our finances.


Not doing a budget before payday is like trying to put a nozzle on a hose with the water running. It just makes a mess, and we end up spending a lot of time and effort trying to clean it up. If we want to make real progress in our finances, we must take time to plan ahead by writing out a detailed budget for our monthly spending before the month begins.


Many of us have heard the phrase “pay yourself first,” but do we really understand what that means? It means we need to put something into our savings account every pay period, even if it is a small amount. Setting aside some money in savings allows us to remain in control of our finances when we have unexpected situations arise (e.g. car trouble, leaking roof, etc.)


Let’s be honest. We all have the tendency to pull a little cash here and there to buy something special for ourselves. Whether it is a morning coffee run, a trip through the drive-thru, or an evening movie rental from the local kiosk, these little trips often go unbudgeted, which can lead to some financial juggling when a major bill needs to be paid. Instead, take time to look at everything you spend money on and make sure to include these categories in your budget. Give each category a specific dollar amount and stick to it. That coffee will taste a lot sweeter when you know it does not affect your ability to pay your electric bill.


Tracking your expenses by balancing your checkbook or reviewing your account statement is a good habit to build, but this only lets you know where you spent your money. It is reactive. Budgeting, however, is proactive. A budget gives you control over your money by planning how you spend it in advance.


Make sure you are budgeting a realistic amount of money for variable expenses such as food and fuel. Look back on recent bank statements to see how many times you went to the gas station. Use that number as a guide for setting your monthly fuel budget. If you know you have some “bigger than normal” trips planned, be sure to set aside more money for the extra fuel and restaurant stops along the way.


“After paying my bills, I don’t have money left for food.” I have heard this phrase uttered too many times, yet it has a simple solution. Make sure to build your budget based on covering your basic needs first. Set aside money for food (basic groceries; not restaurants), shelter (mortgage/rent, utilities, etc.), and transportation before you pay anything else. When your priorities are in order, you may notice some areas where you need to cut your budget. For instance, a $100 cable television bill could be cut or reduced if you need extra money for groceries.


A recent study conducted by Bankrate.com indicates only 37% of respondents have money in savings to cover a financial emergency, such as a $500 car repair or $1,000 medical bill. The rest of us plan to pay for unexpected expenses by reducing our lifestyles (23%), turning to credit cards (15%), or asking friends and family for loans (15%). In addition to saving for future purchases, make sure to set aside money into an emergency fund to cover the unplanned expenses we all encounter.


Spoiler Alert: Christmas is coming in December again! Don’t get caught off guard. Instead of paying off hundreds of dollars on a credit card bill in January, set aside money into a designated savings account each month to save for Christmas and other gifts. For example, if you save $20 each month, beginning in January, you will have $240 to spend when the new toys are on sale in December.


There is a sense of pride that comes from giving to someone in need. Whether it is giving an offering to your church or donating to a charitable organization, make sure you account for these gifts in your monthly budget. Make sure to cover your own bills and living expenses first and then consider giving to others. It may feel good to help, but if you do not take care of yourself, your ability to give will eventually run out.


Author and speaker John Maxwell said, “A budget tells your money where to go, so you don’t look back and wonder where it went.” In other words, think of your budget as the blueprint for your finances. A carpenter does not hammer a single nail until he has a detailed blueprint of a house. Likewise, an effective budget must be in place before a single dollar is spent. Take some time this month to examine your spending habits. Then, make a detailed spending plan based on next month’s anticipated income. It may take a few months to get used to the new pattern, so do not get frustrated and give up. Once you get the hang of it, writing and living on a budget can provide a sense of security that is worth its weight in gold.

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Aaron May photoAaron May 

Advertising Coordinator at Texas Bank and Trust

Serving as the advertising coordinator for Texas Bank and Trust, Aaron May describes his true passion as helping individuals take control of their finances. His personal journey to financial freedom gives him a unique, yet relatable, perspective on budgeting, debt management, and saving for emergencies, the future, and beyond.