Making mistakes while budgeting is a common thing, even for people who have been managing their money for a while. Even financial “gurus” like Dave Ramsey or Suze Orman have made plenty of budgeting mistakes over the course of their lives.
Some of these mistakes can include obvious things like not budgeting for yearly items or failing to even set a budget in the first place. But there are other not-so-typical budgeting mistakes that you might not even know you’re making.
Are you making these four budgeting mistakes?
Mistake #1: Sticking with the Same Budget for Too Long
Albert Einstein said “Insanity is doing the same thing over and over again and expecting different results.”
Imagine this.
You’ve found the perfect budget for you. Things have been going well for six or seven months now and life is great. You’ve saved for your emergency fund, and you’re now working on paying off debt.
Then, things start to not feel right.
You start to miss some minor mistakes in your budget. Perhaps you’ve overspent on eating out, or you’ve made some online purchases that you forgot about. It’s possible that you’re burnt out on budgeting. However, it’s more likely that you are in need of refining or changing up your budget a bit.
Yes, it is possible to stick with your current budget for too long.
Now, if you’re thinking that you just need to push through, let’s look at other industries for guidance.
Exercise and Fitness
Exercise and healthy eating have always been a popular comparison for managing money so we’ll start there.
If you go to the gym and find a well-rounded workout using a certain amount of weight, sooner or later your body is going to get used to that amount of weight. You get healthier and stronger (the whole point of working out, amirite?).
Continuing that same workout routine will eventually waste your time because it will be the new normal for your body—just like you don’t get stronger simply by walking around because it’s normal. At this point, any personal trainer would advise you to change it up to get new results.
The Job Market
The same can be said in the job market these days.
One of the best ways—and sometimes the only way—to get a decent raise is to find a similar role in a new company. If you’ve been stagnant or you’re only getting 1% or 2% raises the past couple of years with no room for growth, it may be time to move on.
Now, I’m not advocating job-hopping by any means. I also consider a new role at the same company as “getting a new job.”
My current employer has had people working there for over 15 years. They are most definitely not in the same roles as when they started and have gone through several transitions during their tenure.
The point is that you may be leaving money on the table by not searching for a new job or role after a few years, whether it’s at your current company or a new one.
So Why Shouldn’t We Change Up Our Budgets?
The answer to that rhetorical question is that we should change up our budgets from time to time. To get the most success out of your budget, you first need to create a budget that works for you. It should reflect who you are and what you value. But even when you create the perfect budget for you, you’ll still need to change it up from time to time. Why?
You change from time to time.
Your values—who you are—will change over time and your budget will need to change with it.
Mistake #2: Not Allowing Yourself to Fail
A lot of times when failure happens, we like to give up and curl into a ball in the corner. I know I’ve done it plenty, but this is not the correct attitude to have.
When you’re budgeting, whether you are a seasoned pro or just starting out, you are going to mess up. And that is ok! Let me repeat that.
Failing. Is. OK!
There is no reason to feel bad about yourself or what you’ve tried if you fail.
It’s easy to fail and give up. It takes strength and courage to get back up and either try again or try something different.
What is Failure?
There is only one way to completely fail at something—never trying in the first place. If you don’t try something, you never succeed. You have no chance.
If you do try something and fail at it, you still grow from that situation. You can learn from the failures, learn from the mistakes, and then take that knowledge to try again or try something new.
By trying something, you also have gained any relationships that you have made in the process. For example, if you’re applying for a new job at work, it’s always a smart idea to network outside of your department to learn about your potential new role.
If you don’t get the new role, you have still gained some new relationships that will be helpful in the future not only for growth but for keeping your name top of mind when the next position opens up.
Redefine failure, not as a lack of success, but as a learning experience for what is next.
Mistake #3: Overspending Without Realizing It
Overspending without realizing it can be a common symptom of not tracking your finances, but it can also happen even when tracking your finances. Here are a couple examples.
Grocery Spending
One of the ways that you may be overspending without realizing it is by going to the wrong grocery store.
In fact, you may be under budget literally every month for groceries and you might still be overspending simply because you’re at the wrong store.
Places like Whole Foods are notoriously expensive, and rightfully so. Whole Foods specializes in selling organic, high-quality food that can really break the bank if you’re not careful.
Have you checked other options?
These days, places like Aldi or Target sell organic foods that are on par with what Whole Foods offers at a fraction of the price. Mariano’s is also a bit of a cheaper choice for great organic foods as well.
Think about where you shop even if you don’t need organic items.
Jewel’s prices are a little bit more competitive than they used to be but they are still above prices at Target, Wal-Mart, and Aldi.
Shop around a little bit.
There are also apps you can download such as Flipp that will curate the grocery ads around your area, making it easier for you to find the right item at the right store.
Entertainment Options
Entertainment is another area that you can overspend on even if you’re under your entertainment budget every month.
Here are some ways you can overspend without realizing it on entertainment:
- Movies on a shelf – Do you buy a lot of movies only to have them sitting on your shelf after watching them once? I made it a goal several years ago to only buy movies I will definitely re-watch. Even a cheap movie you bought but never watch for $10 is wasted money sitting on a shelf.
- Going to see “all the movies” – There are some movies that I definitely have to see opening weekend (Avengers, anyone?). There are others I’m just like “Meh.” Still, there are others I know I will want to see eventually but don’t need the movie theater experience to watch them.
- Not shopping around for discounts – AMC theaters (and other theaters) offer discounted tickets on Tuesdays. This is generally around $5 for a ticket and can sometimes include a free small popcorn. The crowds are a little bit heavier but you still get that movie theater experience without the movie theater cost.
Some ways you can save money on entertainment so you’re not overspending are:
- Visit your library – Your local library may have an impressive array of both movies and video games that you can rent for free. I am rather impressed with the selection my library has, and I live in a small town.
- Rent digitally – Amazon and iTunes usually will only charge a couple of bucks to rent a movie. Even if you rent a movie first and decide you want to buy it later, you’re still only out a couple of bucks more than you would have been. Not too shabby!
- Netflix and Hulu – I’m more than willing to bet that most of you have a Netflix or Hulu account. There are a ton of options on there for both modern and classic movies. There is a good chance that whatever movie you kind of want to see right now in the theater will be on either of these services sooner or later.
I once watched a Jet Li movie called Hero that came out in 2002 that I originally wanted to see in theaters. I don’t write movie reviews, but let’s just say I’m glad I didn’t see that one in the theater.
Check your budget for other areas you might be overspending in without even realizing it.
Mistake #4: Not Learning From Your Mistakes
If you’ve been following my blog, you’ve no doubt heard me talk about how I added $839 a month in extra payments back when we bought our house.
Sadly, that wasn’t the first time it happened.
Since the start of our marriage, we’ve put many things on credit cards with no interest to be able to “buy something now” for a monthly cost. Video game systems, TVs, entertainment systems, furniture, vacations—you name it and it was eligible to be bought now with no interest so we could “afford” it.
Leading up to the $839, I was not learning from my continuous mistake of trying to afford things through a no-interest credit card loan.
It started out with smaller things. “Oh, we can afford an extra $30 a month. No big deal!” Then, it escalated to bigger things like items that would now take $55 a month to pay off in the allotted time.
Then, it was multiple items, maybe a few items paying around $30 a month and a bigger one at around $50.
And it kept escalating until I purchased five items (including a car) with no-interest, plus buying into the Disney Vacation Club for $11,000 at an interest rate of 11.25%. Smh.
Clearly, I wasn’t learning from my mistakes.
We had to work really hard to pay off all that debt in a timely manner. We could have done so many other things with that money.
But here’s the thing. Mistakes are great teachers.
Sometimes it takes a little bit longer to learn from a mistake. Sometimes it takes multiple instances of the same mistake to realize that it is a mistake.
I certainly didn’t realize it, but looking back I should have.
Again, hearkening back to mistake number 2, it’s ok to fail, but it’s a mistake to not learn from those lessons.
Self-Awareness
What financial mistakes have you made consistently?
Maybe you keep having to take on more debt because you don’t have an emergency fund.
Are you focusing so much on debt that you leave yourself literally nothing in the bank? Perhaps it’s time to focus on building an emergency fund of at least $1,000 before you continue aggressively paying down debt.
You may have the exact opposite issue as well. Maybe you have been trying to save so much that you take on more debt because you’re not willing to use your money to make purchases you need to make.
It could also be other things such as eating out too much or constantly going over budget on groceries.
The first step to learning from your mistakes is to figure out the cause of them in the first place.
Why are they happening? Examine your money habits. Track your purchases so you have an easier time seeing your mistakes. And then search for answers.
It could be a mindset issue or it could be you may just need some tips and hacks for managing your finances.
Again, there is nothing wrong with mistakes. That goes right along with allowing yourself to fail. However, not learning from them is another mistake.
Mistakes you made not be thinking of
The four above mistakes are budgeting mistakes you may not realize you’re making. They certainly aren’t things that are on the radar most of the time.
I have made literally all of these mistakes before, and it can be tough to realize they are there. I encourage you to examine your budget to see if you’re making these atypical mistakes.
