Here are 8 of the biggest budgeting mistakes I have seen from my clients. Read each to know what they are and how to avoid making the same mistakes in the future.
1. Quitting Too Soon
Many families love the idea of budgeting, but along with past New Year’s resolutions, they don’t stick with it. Just like learning anything new, budgeting takes at least 3-4 months before you feel comfortable and confident. The next time you start budgeting, plan on trying for at least 4 months.
2. Working Without Your Spouse
Imagine spending two hours setting up a line of dominoes, and before you can feel the thrill of watching them fall, the dog runs through and ruins everything. That’s what it feels like to finish your monthly budget only to have your spouse buy something that screws it all up. If you do not agree on the budget, it is doomed to fail. Be sure to sit down and have a budget meeting before the next month begins.
3. Making it Too Complicated
My wife and I argued for months about how to categorize tiny expenses. Makeup, toothpaste, paper towels, dish soap, shampoo, etc. Finally, we decided that if it was bought to clean ourselves or the house, it fell into the Toiletries/Cleaning budget. That’s it. No more arguing. Making the budget too complicated will cause unnecessary fights. Be sure to simplify enough so that you can understand the budget but are not hiding anything (see #7).
4. Planning for Perfection
The budget is a plan for your money each month, but almost nothing ever goes according to plan. Think of your budget like a 1st down play in football. Before the ball is snapped, the offense has decided on a play to run. The defense is there to mess things up, and the offense sometimes has to improvise. Your budget is only a plan. Life will mess you up and make you improvise. Be sure to treat the budget as a plan of what you want to do with your money and not what you predict is going to happen.
5. No Fun Money
Couples, listen up. Be sure to have some money in your budget that each of you gets to use—no questions asked. Example: My wife and I each have $50 to spend how we want. If I decide I want to treat myself to coffee or ice cream, it comes out of my Fun Money. There’s no discussing, debating, or disputing. Be sure to have this category in your budget every month, and if one of you needs more Fun Money than the other, that’s okay.
6. No Slush Fund
Along with Mistake #4, there will be expenses that don’t really fit into any category. Examples might include buying stamps, purchasing batteries, or paying parking tickets. These things happen, but they are rare. Do you really need to create a budget category for it? No, so throw a couple dollars into the Slush Fund instead.
7. Hiding Something
Do not hide anything from your spouse or from yourself! Unless there’s a birthday or anniversary gift that needs to be covert, do not cheat with your family’s budget. The two main reasons are trust and transparency. When things go wrong, you need to know why they went wrong. Hiding expenses is going to damage the trust you have as a couple or the trust you have in the budgeting process. Be as transparent as possible so you can learn from your mistakes when they happen. Whether or not they are your fault.
8. Forgetting Something
This happens to everyone. It’s normal. Calm down. My clients usually forget about a birthday, holiday, or school trip. Labor Day and Independence Day are good examples because we plan to go on a small vacation weeks in advance but forget to put it in our budget. If you do forget something, have a very short, emergency budget meeting just to fix whatever it is that you have forgotten.