Many people give up on budgeting and return to negative spending habits if they can’t make their budget work or stick to it. Often, difficulties stem from budgeting pitfalls and money misconceptions that can derail your monthly spending plan.

Fortunately, a budget is a living document, so it’s never too late to fix it to make it work for you. If you are making any budgeting errors, learn how to avoid them in next month’s budget so that you can retake control of your spending.

• What are the 10 Common Budgeting Mistake?
• What are Some Pitfalls of Budgeting?
• Why do Most Budgets Fail?

What are the 10 Common Budgeting Mistake?

Not Having a Budget

The greatest financial misstep you can make is to spend without a budget. If you don’t establish a plan for how to spend your money every month, you are likely living in between financial crises, or at the very least, overspending in a way that could eventually put you in debt. In addition, you probably aren’t saving for important financial goals, such as saving for a home or retirement.

Read Also: How to Budget for Personal Finance

Although you may be able to get by for now in spite of this budgeting pitfall, you are not going to move forward if you don’t set up a budget. If, as is the case for some savers, the thought of itemizing a laundry list of monthly expenses is preventing you from starting a budget, focus on one or two spending categories in your first budget to keep it simple.

2. Keeping the same budget every month

Consistency is great when it comes to budgeting. After all, you want to be realistic about your spending habits, while trying to make them fit your lifestyle. However, not taking into account how your spending changes each month is a recipe for disaster.

Think about how much more you spend around the holidays, or on birthdays, compared to months that don’t lend themselves to extra expenses. You don’t want to find yourself stuck a week before Christmas with little to no part of your budget reserved for gifts, parties, and vacations. What should you do?

Take the time to plan your budget on the first of each month, rather than allowing last month’s budget to simply roll over. Take into account all your expected expenses, and don’t forget to leave some wiggle room (but we’ll talk about that later).

3. Guessing at Monthly Costs

You must assess your total monthly income and expenses in various categories to develop a monthly budget that allows you to live within your means.

But when you create your first budget, you might not know how much to assign to the different spending categories in your budget, such as housing, transportation, and food.

As a result, you might make the typical budgeting error of resorting to guesswork to estimate your monthly expenses, which can cause you to drastically underestimate or overestimate your expenditures.

For example, let’s say that you allocate $200 for groceries when you typically spend around $500 per month. Cutting back $300 on food will likely set your budget up for failure.

Instead of playing the guessing game, track all of your spendings in various categories for a month and use the totals as a baseline when you set up your budget. Over the next few months, cut back on spending gradually.

4. Giving up too soon. It takes time

Of course it’s tempting to want to see results immediately when it comes to your finances. But just how it can take you time to notice the negative effects of your spending habits, it will also take some time to reap the benefits of changing those habits. Don’t get discouraged and give up, though.

Think of budgeting like dieting… You have a big goal, but it takes small steps to get there. You don’t try to lose ten pounds in a week, just like you shouldn’t try to have half your paycheck saved the first month of implementing a new budget.

It can be easy to get frustrated and want to give up. Just remember that budgeting takes time, and some tweaking, to get it right. You can’t be expected to be perfect at anything on the first try!

Try this: Remember that you’re in this for the long haul. Budgeting is a commitment to your future. You’re doing this for you… So don’t give up on yourself!

4. Making your budget too stringent

It’s easy to go a bit overboard when first creating a budget. There’s that drive to be perfect and save as much money as possible, so you may end up finding yourself setting some unrealistic goals. For example, if you spend $500 a month on groceries on average as-is, you don’t want to go into a budget only allotting $200 a month for groceries.

Cutting back and downsizing is helpful for saving and creating better spending habits, but if your budget is too drastic a shift from your average spending, you’ll more likely than not end up breaking your budget.

Try this: Think about the spending categories that are most important to you and the ones in which you think you can cut down the most in. Cut back gradually at the beginning, so you can get a feel for what’s comfortable while also helpful for your finances. You may even find yourself saving more than you bargained for!

5. Leaving Out Items

Another typical error that people make is to fail to include all of their expected expenses in their budget. For example, you might leave out small recurring expenses, such as your daily ride on the subway, or even large one-time expenses like wedding and holiday gifts.

No matter how small it is or how seldomly you incur an expense, if you have not planned for it, you have made a money mistake that can throw off your budget in the month you eventually pay for it.

To budget for irregular expenses like car insurance, divide the amount that you typically pay by 12 and then set aside that money each month in your budget. Likewise, include small, frequently forgotten budget items. After a few months of budgeting, you should be able to identify any expenses that you are missing and can tweak your budget for the next month accordingly.

6. Not having an emergency fund

How many times have you found yourself needing extra money unexpectedly? There are always unforeseeable factors in our lives that we simply can’t predict when creating a budget. That’s why an emergency fund is so important.

Think about expenses such as car repairs, medical expenses, or increased fees. These aren’t expenditures you can predict or control, and you need to have room in your budget to account for them.

Try this: Keep a set amount of money (anywhere fro $500-$1000 is a great place to start if you aren’t sure how much you’ll need) in case of emergencies. More often than not, you won’t have to use this money, and it will simply roll over into next month’s budget. But, if you do find yourself crunched for cash, you won’t be without a safety net.

Budgeting can be a daunting prospect. No one likes the idea of sitting down in front of a stack of papers and restricting themselves on how much money to spend. However, budgeting properly sets you up for a satisfying financial future, a stable savings account, and a healthy relationship with your money.

7. Not Working as a Team

One of the biggest pitfalls of budgeting for couples to avoid is spending in a silo. For example, if you and your spouse both spend in the same category at the same time of the month, your combined spending might exceed what you planned to spend in that category and unwittingly blow your budget.

Or, one spouse might fail to consider the unique financial needs and wants of the other (the desire to pay down debt or save for a vacation, for example). This practice can lead both individuals to eventually abandon the budget.

You and your partner should openly discuss where you are financially and where you want to be on a regular basis and work together on your budget. This will prevent you from overspending and will keep you on track to meet individual and joint financial goals.

8. Assuming Your Monthly Bills Are Set

Many people view fixed expenses as​ non-negotiable budget items. For example, your cable or cell phone bill may be the same amount each month. As a result, when looking at your budget, you might not look for opportunities to reduce common expenses.

This is a typical budgeting error that can cause you to stick with overpriced service providers year after year and wind up with budget bloat. If your service provider is stellar, consider downgrading to a more affordable plan or even calling in and attempting to secure a lower monthly price.

If you’re ready to move on, shop the competition for everything from insurance to your cable provider and gym to get the best bang for your buck. Doing so could trim your budget by tens or hundreds of dollars each month.

9. Classifying Wants as Needs

Another typical error that individuals make in their budget is to classify “wants,” which are non-essential expenses like personal travel or eating out, with “needs,” which are essential expenditures such as mortgage payments and groceries.

Misclassifying wants as needs or lumping them into the same spending category in your budget can be financially perilous because you’re unlikely to cut back on spending on needs as much as wants.

To avoid this pitfall of budgeting, examine each of the items you regard as needs and ask yourself whether you could lead your life without it. If the answer is “yes,” that item is a non-essential expense and should be classified as a want.

10. Not Budgeting for Fun

Depriving yourself of all entertainment spending is a budgeting pitfall that makes it more likely that you will blow your spending plan for the month.

Catching a movie, seeing your favorite performer in concert, and even occasional shopping splurges are all within bounds, as long as you put them in your budget each month and stick to the amount that you planned to spend. Otherwise, you might end up spending more than you would have if you had never set up the restrictions.

What are Some Pitfalls of Budgeting?

Although budgeting provides a lot of benefits to your financial life, there are definitely some disadvantages associated with budgeting. We will talk about five of them now.

1. Making an unrealistic budget

Small businesses typically maintain spending restrictions. Although it is important for small companies to guard against overspending, one budget creation pitfall is that of creating an unrealistic budget.

Business owners may unintentionally create a budget that is simply too tight, which may lead to hampering everyday operations. This results in constant budget revisions for unplanned expenses.

Conversely, it is equally easy to overspend and create an inflated budget which does not coincide with profitability goals. Attempt to create as realistic a budget as possible.

2. Not outlining your objectives clearly; confusion between what is needed and wanted

Following your business plan is vital to developing a budget that fulfills all your business needs. Disregarding the groundwork that is laid out in the business plan leads to creating an unrealistic budget.

If for some reason you have not yet developed a business plan, begin by outlining business objectives and allocating specific dollar amounts to each objective as you build your budget. Be sure to allocate but also to monitor these funds, as simply allocating funds to potential activities can lead to miscalculations and overspending, which results in financial problems.

Remember to include and account for items such as profit-sharing expenses, staff bonuses, and maintaining a good credit history when outlining your objectives.

3. Not leaving room for the sudden and unexpected requirements

Ideally, budgets are created based on a business plan. However, this may not account for any unexpected needs. Plan and budget for unexpected expenses to avoid having to draw funds away from other important budget categories, resulting in a needless financial hassle.

Instead, plan for the unexpected, and set aside funds for these unplanned situations. When creating a budget, keep in mind market price fluctuations that may impact your expenses

4. Depending on future earnings

How often do we make the mistake of assuming that a future income will pay for a certain current expense? While this thinking is not entirely wrong, it is all about achieving the right balance. Instead of allocating significant funds that are dependent on future earnings, consider holding off on incurring the expense.

You can then allocate this expense to the next billing cycle. If the expense cannot be deferred, evaluate vendors who offer something more affordable. If necessary, invest time researching more affordable suppliers who will agree to your payment terms.

5. Insisting on precision

While matching expenses to income is central to a budget, how much precision can you achieve without wasting additional time and money? Trying too hard to include everything inside a single budget can lead to frustrations and wasted time. Furthermore, a precise budget unintentionally may not allow for unexpected expenses.

Why do Most Budgets Fail?

A 2019 Debt.com poll found that only 67% of American households prepare a monthly budget. There’s a budgeting system out there that will work for you — even if you’re not good with numbers or saving money. There are as many ways to budget as there are types of spenders.

However, the first step to figuring out the right one for you is knowing some of the main reasons budgets fail and how to avoid the most common pitfalls that can lead to frustration and failure.

1. It’s Not Realistic

If you’ve ever abandoned a new diet just days after starting because the only thing you could eat were carrot sticks, you understand the futility of an overly restrictive and unrealistic plan. Similarly, many budgets leave no wiggle room, making them impossible to follow for any length of time.

If you’re starting with zero savings and no budget at all, it’s not realistic to expect yourself to completely overhaul your spending and eliminate any impulse purchases or unexpected expenses in a month’s time.

One of the main pitfalls for people who abandon budgets is going from no budget at all to trying to cut spending dramatically and setting impossible goals. If you set yourself up for failure, that’s precisely what you’re going to get.

Solution

Find the budgeting method that works best for you and your family. At the very least, you should track your spending each month through an app like Tiller. If you find that you’re already spending most of what you earn on living expenses and other needs, saving 50% of your income isn’t attainable. Instead, pick targets within your reach.

For example, cut back from eating out three times a week to only twice. Instead of going out to the movies, take advantage of your public library’s free resources and check out DVDs instead. You can always change your budget in the future as your spending habits and savings needs change.

2. You Don’t Know Why It Doesn’t Work

If you don’t understand the reasons your budget keeps failing, you’re never going to find one that works for you. Knowing what about your current system or those you’ve abandoned in the past has tripped you up can help you figure out what can help you succeed in the future.

Solution

Pay attention to the feelings you have when you think about your budget. Are you ignoring it because you hate spreadsheets? Ditch the spreadsheets in favor of something less byzantine, like a service such as MoneyPatrol or Pocketsmith that automates budgeting for you. If technology’s not your thing, try the envelope budgeting system.

If you think budgeting is boring and lose interest quickly, brainstorm ways to make it more fun. For example, turn it into a game. Think of staying on track like the thrill of maintaining a winning streak in your favorite sport.

If you’re not sure which method is best, try a few before settling on one or deciding budgeting doesn’t work for you.

3. You Don’t Know Your Spending Style or Triggers

If you don’t know what you splurge the most on or what types of situations make you throw caution to the wind, you can’t choose a budget that fits your style.

For example, if you almost always stick to your grocery list but can’t stroll past a clothing store without ducking in “just to look” and then strutting out $50 poorer, your grocery budget probably isn’t your most significant problem area.

Solution

Knowing both your triggers and strengths can help you find a no-fail strategy that works for you. Pay attention to your spending style. Do you find it easy to say no to buying stuff for yourself but love to spoil your kids? Or perhaps you’re an emotional shopper who turns to retail therapy after a hard day.

If you know your spending style, you can identify your challenge areas and use some strategies to help keep your budget under control. Consider using a free budget template, like these printable options from The Savvy Couple, to stay on top of your spending and address trouble spots early.

4. Your Partner, Family, & Friends Aren’t on Board

If you’re trying to make and stick to a budget but the other people in your household aren’t willing or even aware of your efforts, they could unintentionally sabotage you. Think about your past attempts at budgeting. Does your partner scoff at trying to save money? Are your roommates encouraging you to splurge when you want to be saving?

The people we spend time with influence our spending habits for better or worse. If those closest to you aren’t on board with your budget strategy, you’ll probably have a harder time staying with it for the long haul.

Solution

The solution here depends on who’s being the bad influence.

Before imposing yet another budgeting strategy on your partner or family, talk with them about your short- and long-term goals. Would you like to buy a house soon, travel more, or have the time to learn a new language? Your goals don’t have to be budget goals — simply things in your life you’d change given the opportunity.

Once you’ve identified them, think about how having more control over your budget — and thus, more money at your disposal — can help you accomplish those goals.

For example, if you’d like to have more free time to pursue hobbies, sticking to a budget and saving money means you don’t have to work as much and can make more time to pursue other interests.

If you’re thinking of starting a family but can’t fathom affording the baby-related expenses, getting your budget under control helps you financially prepare. If you can figure out a way to convey to your loved ones how sticking to a budget offers more options rather than less, you can finally get everyone on the same page.

If your roommates or friends are a bad influence on your spending, it’s possible they just don’t know you’re trying to budget or cut back. Once you open a dialogue, you might find that they’re understanding or even in a similar situation.

5. It Doesn’t Fit Your Lifestyle

If you’ve budgeted 30% of your take-home pay on housing but live in an area with a high cost of living, adjust the categories and make your budget work for you, not the other way around. You also have to choose a budget with categories that fit your lifestyle.

For example, if you download a spreadsheet from the Internet that’s filled with columns like “property taxes” and “car payment,” and you don’t own a house or a car, you could succumb to temptation to spend that money instead of saving in those categories because the budget doesn’t feel like yours.

Solution

Tailor your budget to your current spending categories, and then look for places to edit and reduce spending. For instance, if you’re putting more than the recommended 20% of your budget toward paying down your student loans because you have a goal to be debt-free in five years, that’s OK as long as you can save money in other areas and stick to your budget.

Otherwise, it’s probably best to lower your student loan payments by refinancing through Credible. When you refinance through Credible you can earn a bonus of up to $750.

Find a budget that fits your lifestyle and spending categories first. Then work on trimming your expenses.

6. You Don’t Have Goals

It’s much easier to drag yourself to the gym if you have a specific target, like losing 20 pounds in six months or keeping the money you bet on a fitness goal.

Similarly, it’s much easier to work toward a financial goal rather than merely saving money because you know you should. If you find it hard to stay motivated to save money or follow a budget because you don’t see the point, you first need to figure out what your goals are.

Solution

Before you try yet another budget, ask yourself some questions. What would you do with an extra $250 or $500 a month? Would you be able to buy a house sooner or contribute more to your retirement plan? Maybe your family could finally take that dream vacation to South America or spend a month driving across the United States in a camper van.

When you’re thinking about your goals, make sure they’re SMART goals: specific, measurable, attainable, realistic, and timely. Whatever the goal is, knowing you’re working toward something makes it much easier to stick to a budget.

7. You’re Not Rewarding Small Successes

Just like a lack of goals can hurt your motivation, failing to build in any rewards also makes it harder to stick to your budget. It sounds counterintuitive since the whole point of a budget is to reduce spending, especially in frivolous categories.

However, according to a 2017 study published in the journal Frontiers in Human Neuroscience, there’s some science behind this tactic. By rewarding yourself for minor victories or achieving small goals on the way to a larger one, you trigger the release of dopamine, the feel-good chemical, in your brain.

The dopamine’s positive effects encourage more of the behavior that brought about its release in the first place. So if you’re not rewarding yourself, you can lose the motivation you need to stick to your budget.

Conversely, don’t fall into the trap of overdoing it. Spending half of what you saved in the last two months on one night out with friends is a budget-killer.

Solution

To reward your successes without completely derailing your budget, make sure the rewards are small, measurable, and disciplined. For example, if you stick to your budget for the month and don’t overspend in any category, reward yourself with an inexpensive luxury.

It’s essential that your reward feels indulgent and makes you happy. It can be as simple as taking a long bubble bath while your kids watch a full-length movie or skipping the dishes for a night and getting into bed at 8pm to binge-watch your favorite guilty-pleasure show.

Or splurge on something small, like gourmet coffee beans, which can also save you money by keeping you away from that pricey coffeehouse for a while.

There are tons of free and inexpensive rewards to help you avoid frugal fatigue, which can lead to falling off the budget wagon and blowing all the cash you’ve saved after making yourself miserable. Make a list, and when you achieve a small goal, pick something off the list as a reward for your success and to help you maintain your motivation.

8. It’s Too Easy to Spend Money

What do one-click ordering, stored payment information, and subscription boxes all have in common? They make it very easy for you to spend more money than you intended to. That’s especially true if you’re paying for everything with a credit card. Credit cards encourage consumers to spend more.

Solution

Add some friction back into your spending. Is it too easy to whip your credit card out when you’re online shopping during your lunch hour? Leave the card at home or in your car so it takes real effort to use it.

Also, remove your credit card or bank account number from any website that stores it in your profile. That way, you won’t be tempted by the ease of one-click ordering.

Anything you can do to make it harder to part with your paycheck can help you stick to your budget.

Right after you remove your saved credit card from your browser, add the Wikibuy extension. When you do shop online, Wikibuy will automatically apply available coupon codes to help you save money.

9. Increase Your Income

Finally, take a look at your budget and ask yourself if you truly cannot trim it any further. Have you cut cable, used a service like Truebill to slashed your subscriptions, and reduced your transportation expenses to the bare minimum?

Read Also: Everything You Need to Know About 50-30-20 Budgets

If you never eat out, are a seasoned home gardener, and do all your own home maintenance and upkeep, you’ve probably reached the limit of expenses you can reduce while still leading a life worth living. If this sounds like you, and you still feel like you’re failing at keeping a budget, it’s probably time to explore something other than decreasing your expenses.

Solution

The good news is there are many ways to increase your income. If you’re employed, maybe it’s time to talk about a raise or promotion. If that’s not an option, look for a new job or side gig.

Perhaps you can do odd jobs around the neighborhood like babysitting, dog walking through Rover, delivery groceries through Instacart, or general handyman chores through a site like Thumbtack. If you’ve got an extra room in your house, look into renting it out on Airbnb.

If you’re crafty or like to sew, list some of your creations on a marketplace like Etsy. If you raise chickens, like to bake, or are an experienced canner, see if you can interest your neighbors in your wares.

There are a ton of different ways to increase your income, so if saving more isn’t an option, think creatively about how you can make a little more money to help your budget succeed.

Conclusion

Finding a budget that works for you and your family and sticking to it is both an art and a science. It can also be an exercise in frustration. However, a reasonable budget can help you turn money into a tool you can use to make your life better, happier, and more productive.

When you’re asking yourself why your efforts at sticking to a budget have failed in the past, keeping your goal in sight helps you find the right strategy for you to make your budget a success.

Once you get into a rhythm with your monthly budget, you can create a special holiday budget to start planning for the extra expenses that the time of year brings too.