9 Terrible Budgeting Mistakes That Are Costing You Money

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Last Updated on June 6, 2020 by Rebecca Lake

Want to fix your budget but don’t know where to start?

I get it.

Mine has been a real train wreck at times.

But making a budget is important for getting out of debt, building wealth and creating financial security.

So you have to make every penny count, right?

It’s super frustrating to find yourself coming up short every month, especially when you live on a tight budget or worse, paycheck to paycheck

And sometimes, you might be doing things wrong with your budget that are making your money situation worse.

That’s probably not something you want to hear but there is a silver lining. There are things you can do to fix your budgeting mistakes and get your financial life back on track.

That starts with taking a closer look at what you might be getting wrong when it comes to your budget.


budgeting mistakes

9 Budgeting Mistakes That Are Costing You Money

If your budget isn’t working, it could be one thing that’s throwing you off. Or it could be several things.

If you feel like your budget is tanking, ask yourself if any of these nine reasons might be the cause. 

(Confession time: #1,2 and 4 used to totally kill my budget.)

And don’t worry. I’m giving you some solutions you can use to fix your budget for good.

1. You never track your spending

Making a budget is a pretty straightforward process.

You add up your expenses for the month, then subtract that amount from your income. It seems simple, right?

Where you can run into problems is not tracking your spending.

Sure, you might know what your rent or mortgage payment is or how much your light bill is on average, but do you know to the penny what you’re spending on groceries or your kids’ activities or clothes each month?

If the answer is no, you can almost guarantee that your budget’s going to backfire.

How to fix it: Use a budgeting app to track your spending

Budgeting apps make it so much easier to manage spending. You just link up your bank and credit card accounts and the app does the hard work for you.

Best of all, there are lots of free apps you can use to fix this and other budgeting mistakes.

If you need some recommendations, here are are a few of my favorite expense tracker apps:

2. You’re letting money slip through the cracks

One of the worst budgeting mistakes you can make is throwing money away without realizing it.

You might assume that it’s the big expenses that wreck your budget but it’s not. It’s those small costs that end up overlooked that really take a bite out of your spending.

Bank fees, for example, can quickly add up. The typical American pays $475 a year in bank fees alone, on average.

That’s crazy, right?

Then there are other things like streaming services, subscriptions and recurring fees that you forget about. It’s all money that’s going down the tubes you can and should reclaim.

How to fix it: Plug the money leaks

If you’re tracking your spending, then it’s time for a total budget review. Start with the basics first.

How much are you budgeting towards essentials, like housing, utilities and groceries each month?

Next, how much are you budgeting for everything else?

Now, compare what you’re budgeting for each expense to what you’re actually spending. Are there things you’re spending more (or less) on than you budgeted for?

Review every single expense in each budget category and ask yourself, “can I cut back on this or get rid of it altogether?”

It might seem a little tedious but it’s a must if you’re going to fix your budget and smooth out your spending. 

And if you need some help cutting expenses, Trim Financial Manager can help. Trim reviews your spending for you to find ways you can cut back and streamline your budget.

3. You don’t save anything

An emergency fund is a financial lifeline. When you don’t have an emergency stash, you’re setting yourself up for budget trouble. 

If your kid gets sick or you need new tires for your car you might have to get a loan or use a credit card to cover it. Or else you have to pull money from another part of your budget to avoid taking on debt.

Both choices suck in their own way. Having savings gives you another way out so you don’t have to go back and try to fix your budget later.

How to fix it: Add savings to your budget

If you’re not naturally a saver, it can be hard to get started. I personally love to save but I know you might not feel the same way. 

An easy fix to start a savings habit is to treat it as an expense in your budget.

It doesn’t matter if you start small either. Thinking small is actually a good thing because it makes saving seem a lot less overwhelming. 

If you feel like you can’t save anything at all, go back to Step 2 and take another look. Even if you can only find $10 a month to save, that’s something.

Most importantly, commit to saving it every.single.month.

A painless way to do that is to use a money-saving app like  Acorns to save money for you automatically.

These apps link to your checking account and save your spare change for you. All you have to do is spend like you normally would to watch your money grow. 

And keep your savings in the right place. Online banks like CIT offer high yield savings accounts that give you more bang for your buck when earning interest.

4. You can’t say no

Budgeting is about drawing lines in the sand. You look at your income and say, “Okay, I’m going to spend XYZ on this,” and that’s it.

In theory, that should be easy to do. But if you’re terrible at saying no to your kids, yourself or anyone else, your budget’s never going to work. 

How to fix it: Get your kids on board

It’s never too early to start teaching kids the basics of managing money.

My kids understand what a budget is and what it’s for. They also know why saving is important and how credit cards work and why I have to pay taxes in my business. 

If you want to fix your budget, make it a family effort.

You don’t have to spell out specific numbers to your kids but help them understand why you want to make your budget work, and how they can help.

Talk to them about the difference between wants and needs using examples they can understand. 

And set a good example yourself.

If you’re telling your kids no to something they don’t need, don’t spend money on yourself that you haven’t budgeted for without thinking it through first.

fix your budget

5. You’re in total budget denial

Denial is a big budget-killer because it keeps you from facing up to why you really need to fix your budget in the first place. 

For example, you might just ignore how high your expenses are or how much you spend on extra stuff each month.

Or you might be paying on debt without even knowing what you really owe because you’re too scared to add it up. 

 Until you get real about the weak spots in your budget it’s only going to work against you, not for you.

How to fix it: Face the financial music

Pick a day that you can look at your bank accounts, credit card accounts and other debts.

Add up all the numbers, without flinching. Hopefully, the damage isn’t as bad as you think. But if it is, then the next step is coming up with a strategy to deal with it.

For example, you might try the debt snowball method to start paying down debt. Or vow to put your credit cards away and switch to only spending cash.

These are big steps toward fixing your budgeting mistakes and creating a healthier financial life.

6. You don’t know why you’re budgeting

You might make a budget every month but do you know why you do it?

One of the biggest misconceptions about budgeting is that it means you have to shut down your spending and basically deprive yourself of anything fun.

Not true.

A budget isn’t about what you can’t do; it’s about what you can do when you’re in charge of your money.

Ask yourself what your goal is for budgeting.

Is it because you’ve gotten into debt from overspending and you want to break the cycle? Or because you’re finally ready to start saving?

You need to know why you’re budgeting and what you’re working towards; otherwise, it’s just a wasted effort.

How to fix it: Become a money goal-setter

Goals are super important to me. 

Setting money goals allowed me to pay off $23,000 car loan in 17 months, save half my income for the last two years in a row, buy a home and get my credit score over 700. 

None of that may be a big deal to you but that kind of stuff gets me excited. And every time I hit one of my financial goals, I’m ready to start setting new ones. 

What are your money goals? If you don’t have any yet, try this:

Think about what you want your financial life to look like. 

Where do you live? How much money do you make? What kind of work are you doing?

How much money do you have in the bank? What kind of feelings does your money situation inspire? 

That vision is in itself one big goal. But unless you win the lottery or score a huge inheritance, you may not be able to do all the things to get there right now.

That’s okay.

Pick one thing you want to work on, then break it down into smaller steps. Then go back to your budget and see what adjustments you need to make to reach your goal.

Keep doing that over and over and before you know it, your ideal financial vision becomes your real life. 

piggy bank

7. You picked the wrong system

There are lots of ways to make a budget.

How you choose to do it might be completely different from how your best friend or your sister does it.

The struggle happens when you’re using a budgeting system that doesn’t really fit you.

It just makes you more frustrated and the more frustrated you get, the more tempted you might be to just walk away from budgeting altogether. 

How to fix it: Find the right budgeting tools

There’s no end of tools out there to help you plan your budget. You just have to find the one you like best.

For instance, you can try budgeting apps, budgeting software programs or spreadsheets.

You can use the half-payment method to budget, the cash envelope system or a zero-based budget.

There are so many different options and ways to fix your budgeting mistakes.

I recommend trying out a few different things to see what clicks. Give it at least a month for each budget system you try on.

The worst that can happen is that at the end of the month, you move on to something else until you find “The One”.

Bottom line, budgeting should help you stress less about your money, not more. It doesn’t really matter which system you choose. All that matters is that it works for you.

8. You think budgeting is once-and-done

Your budget isn’t something you should just set and forget. Your budget should change as your life changes.

If you get a big raise at work but you don’t update your budget, chances are any extra money you’re making is just going to get spent. The same goes if you pay off a debt or some of your expenses go down.

Your budget has to fit where you are right now financially, not where you were six months or a year ago.

How to fix it: Schedule budget dates

Maintaining a good relationship with your money is the same as maintaining any other relationship. You have to put in the time and effort to make it work. 

That’s where budget dates come in.

You block off a chunk of time on a regular basis to look at your income and spending. This is when you can make any adjustments if you see your budget veering off-course. 

Plan to sit down with your budget at least once a month; once a week might be even better if you have the time, especially if you’re trying to make a budgeting comeback.

The key is to be consistent with the timing and commit to showing up.

9. You’re convinced you’ll never get ahead

When you’re living on one income or your money just doesn’t seem to ever stretch, it’s tempting to just give up on budgeting altogether.

This might be the costliest of the budgeting mistakes you can make, though.

When you assume that budgeting just doesn’t work for you, you’re not giving yourself a chance to manage your money any differently. And that can keep you stuck in debt, with no savings, wasting money every month.

Not exactly where you want to be, is it?

How to fix it: Adjust your money mindset

Reframe how you think about budgeting and your money. 

Don’t focus on what you don’t have or the budgeting mistakes in your past. Look at where you want your financial habits to take you going forward.

Stay focused on what you can do to make your budget better, instead of wallowing in where you went wrong.

Any time you feel like giving up or giving in to an overspending urge, remind yourself that your budget has a purpose.

And that purpose is bigger than whatever it is you want to spend money on at the moment. 

fix your budget

Are you making any of these budgeting mistakes?

Getting budgeting wrong can cost you in more ways than one. But if you’re making any of these budgeting mistakes, you’ve still got a chance to turn it all around.

And hopefully, you haven’t given up on budgeting altogether. Because it truly can change your financial life for the better.

Do you have another great tip on how to fix your budget? Head to the comments and tell me about it. 

And don’t forget to pin and share this post! 

About Rebecca Lake

Rebecca Lake is a Certified Educator in Personal Finance, freelance writer and homeschooling single mom of two. Since 2014, she's paid off nearly $100,000 in debt and grown her net worth to seven figures. Her work has appeared online at top personal finance websites, including Forbes Advisor, Bankrate, Investopedia, The Balance, CreditCards.com and U.S. News & World Report. Find out more.