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Budgeting Mistakes to Avoid

January 8, 2024

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Woman Budgeting

Failure is an inevitable part of learning any new skill, whether that skill is riding a bicycle, learning to drive stick, or tackling your personal finances. When we fail, it’s tempting to throw our hands up in the air and claim defeat. However, for something as important as managing your finances, giving up simply isn’t an option.

Effective budgeting is a powerful tool to help you manage your money, save for the future and avoid long-term debt, but there are several common mistakes people make that can derail their progress and increase their financial anxiety. Here is a list of several common budgeting pitfalls you should avoid on your road to financial wellness.

Not Tracking Spending

Take a moment to think about how much you spent on food in the past week. Do you know the exact amount? How about your monthly bills, like rent or gas? Maintaining an accurate budget means knowing exactly where your money is going by tracking variable expenses, such as groceries or entertainment, as well as fixed costs like rent and utilities.

Why is this important? Because tracking your spending helps you determine where you may be overspending. If you are not paying attention to your spending, you may be missing opportunities to save.

You should formulate a system for tracking your expenses. Some people prefer spreadsheets and pen-and-paper while others rely on budgeting apps to keep track of their spending.

Ignoring Expenses

Most people maintain a monthly budget that tracks income and expenses on a month-by-month basis. However, this doesn’t account for irregular expenses that occur at longer intervals throughout the year. Examples include property taxes, insurance payments, school or tuition fees, annual subscriptions, and membership dues. Not taking these expenses into account could leave you short on cash during certain months of the year.

A solid method of preparing for irregular costs is creating a fund specifically for paying off one-time or irregular expenses. Look at your past bills for taxes, school, insurance, etc., and determine how much you pay annually for these expenses and when the payments come due. Calculate what percentage of your income you must set aside each month so that you will have the funds available when you receive these irregular bills.

Couple Goals

Setting Unrealistic Goals

Your budget should attempt to find a balance between saving and comfort. If you set savings goals that are too ambitious, you may find yourself struggling to keep up with your plan. It’s important to allocate some of your budget toward entertainment and fun to prevent you from burning out and abandoning your savings plan. Start off with small, achievable goals and work your way up to more ambitious targets.

On the other hand, setting loose goals can also be problematic. It’s important to set a budget that considers your responsibilities and needs—such as bills, groceries, and utilities—so that you don’t find yourself taking on debt because you didn’t save enough.

Not Having an Emergency Fund

There is a popular saying that goes “no plan survives contact with the enemy.” In this example, the enemy of your budget is surprise expenses that make it harder to maintain your savings plan. If you’re balancing out your budget to the point that your income and expenses are equal, even the smallest financial hurdle can cause you to stumble before you reach the finish line.

The best thing you can do is include an emergency fund in your savings plan. Budget some portion of your monthly income into an emergency fund that is separate from your normal savings. In addition, do not dip into these funds except in the case of a financial emergency! This acts as a cushion for future expenses that can’t be accounted for.

Neglecting Your Budget

Your budget is not set in stone. You need to remain flexible and adjust your plan whenever something changes in your financial situation or even in the broader economy. You should revisit your budget any time you encounter a big financial change, such as moving or changing jobs. Pay attention to things like inflation which change the amount you spend each month on things like groceries or gasoline and don’t forget to adjust your budget accordingly.

The key to budgeting is practice. Like any skill, you are going to make mistakes when trying to achieve your financial goals. It’s important to not let these hurdles deter you from sticking to your plan, but it is equally important that you remain aware of any traps you may fall into. By successfully avoiding or managing these budgeting hurdles, you’ll put yourself on track for a bright financial future.


Michele Hunsicker

Michele Hunsicker is an Executive Vice President and Chief Financial Officer for New Tripoli Bank. She has been part of the Bank's finance department for over twenty years and has worked in banking for over thirty-five. Michele serves on the board of the Northern Lehigh Food Bank and regularly volunteers with her local church.





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