5 Budget Blunders to Avoid

Budgeting is an important and valuable financial tool to use when managing your money. The long- and short-term benefits of budgeting also make it a popular tool for those setting goals, both small and large.

Budgeting is only as effective as you make it.  While it doesn’t have to be overly complicated, there are some important steps that can cause blunders rather than benefits.

1. Setting Unrealistic Budgets

Those who don’t set realistic budgets can get easily discouraged or find themselves too stretched to make ends meet. Budgets need to be created based on your own personal financial situation and your goal. Identify what you can realistically set aside without stretching yourself too thin, while still accounting for things you want to be able to do and reach your goal.

2. Not Writing it Down

One of the biggest blunders and easiest ways for people to get off track is by not writing down their budget to begin with. Having an “idea” isn’t going to cut it to reach your goals. Being able to see and track your budget allows for accountability and helping you reach your goals faster.

3. Not Tracking Your Spending

Similar to not writing down your budget, not tracking it is another blunder that can quickly get you off track. Whether it’s a notebook, spreadsheet, or even an app, tracking your spending will ensure you reach your goals in your set time frame. When tracking, it’s important to track everything, including only one-time purchases.

4. Poor Planning

What’s often overlooked when it comes to budgeting is accounting for emergency expenses and fun. Think back up to #1 above and setting unrealistic budgets. You want to ensure when you’re creating a budget that you’re also accounting for possible emergency fund needs and for your discretionary expenses (non-essentials). This is a good time to consider subscriptions and discretionary spending and determine if you can cut anything or cut back. For emergency funds, it’s recommended to be able to cover at least 3-6 months’ worth of expenses in savings.

5. Not Re-Evaluating

You’re likely not going to be able to plan your budget and stick to it on the first try. Life happens, circumstances change, and one you begin tracking, you may notice that you need to adjust your budget. It’s important to schedule a quarterly evaluation period to look at your spending and budgets and readjust if needed. Not only does this support your goals, but it also prevents you from getting discouraged, thinking your budget isn’t working.

If you’re looking for more support creating or maintaining your budgets, reach out to us today and speak with one of our experienced universal bankers. We also offer great vacation and Christmas club saving accounts to make saving even easier and convenient for you!

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