A Modern Day Fairy Tale

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Common 'Cents' About Budgeting: Frequent Mistakes to Avoid

Attempting to make one income span the multitude of a family’s expenses can be one of those tasks
that seems almost impossible. Making sure you have enough for what’s needed now as well as
something for the future requires in depth budgeting.

Although, if you’re like the many families who aren’t financial gurus, then you may make mistakes
when it comes to planning out your periodical expenses. It gets tedious when you have to account
for every small expense that may seem negligible, but keeping track of what types of purchases you
make is the best way to plan for the future.

There are numerous errors that a family can make when it comes to their budgeting. Not all are
detrimental to the financial survival of your family, but when compiled together they can become a
formidable obstacle.

To make your financial obstacles about as formidable as a plush toy, avoid these common budgeting

  1. Thinking you can budget in your head

One of the most common mistakes seen in haphazard budget scenarios is when you don’t
write your budget down. Even if you have an eidetic memory, it can be extremely difficult to
view your spending as a whole. Writing all of your expenses down can show you where you
make the most expenditures and how much they cut into your available income. You then
need to create a budget based off of those expenses, which is impossible to do without a
visual. Create a monthly budget in a spreadsheet program if you’d rather have a digital record,
or you can use budgeting software that will aide you throughout the process. In any case,
merely creating a mental budget isn’t enough. Commit it to paper (or screen).

  1. Creating an allowance that’s too unforgiving

If you’ve considered your expenses thoroughly, then you should know how much needs to be
allocated to certain expenses. For example, if you have a recurring monthly water expense of
$150, then that’s what you should set aside. However, if you have an expense that isn’t static
from payment to payment, then you need to give yourself enough of a cushion so as to not
cut yourself short. A family of five may have a weekly food bill of $250, so you wouldn’t want
to budget that so strictly that you’re unable to get what you need. Leave yourself some wiggle
room for those fluctuating expenses.

  1. Not accounting for irregular expenses

Bills and expenses that only pop up here and there are often forgotten when creating a budget.
Semi-annual, annual, or other payments that aren’t on your mind until they come due are
expenses that need to be added into your budget. A good method to use for these types of
payments is to set aside a year’s cost of that expense and draw from that allocation
everytime you need it. If you give your children an allowance, that is something you’ll need to
budget for as well. Allowances can be an important way to teach your children about budgeting
, and so it may be a good idea to retain them in your own budget. A majority of Americans
(57%) were given an allowance growing up, and 90% of them had to do chores to earn it. So
it could be a win-win situation.

  1. Forgetting to save

Even if your budget only allows for minimal saving, don’t forget to put some money away each
month. You can save for any type of future expenses that may or may not be foreseen. Things
like retirement, college funds for your children, and in-case-of-emergency stashes are all
reasons to start saving now. Don’t worry if you’re only able to put away a few dollars here and
there. As time goes on that money will add up and you’ll get better at budgeting too, allowing
you to find more places to save.

  1. Not having any play money

Saving and budgeting is important, but so is enjoying life. You don’t have to be extravagant, but
you should budget for occasional fun expenses. Things like date night, ice cream with your
children, drinks with friends, or even things for yourself like a new shirt or a manicure. If you
don’t budget for these expenses, then there are generally two outcomes: a) you don’t limit
yourself on how much you can spend on luxuries and end up blowing your entire budget, or
b) you feel guilty for every unplanned expense and convince yourself you ruined your budget.
In either case, it’s a good idea to set aside a little something extra every month for you, your
spouse, and whoever else. If you adopt a rollover policy as well, then whatever fun money you
don’t spend that month can be used next month, and so on. A rollover policy is great for
minimizing your impulsive expenditures and holding onto that money for bigger, better
expenses down the road, such as a trip.

  1. Disregarding the small stuff

It’s imperative to budget for all expenses, and to stick to that budget. Sure, that Snickers only
cost $1.79 today, but when added to the soda, pack of gum, lotto ticket, daily coffees, and last
Friday’s happy hour with work friends, it turns into a much bigger expense. Create a budget
that has room for these small purchases (occasionally) and make sure you adhere to your
budget. People tend to underestimate the power of small purchases, but it only takes a few to
really blow your budget for the month.

  1. Not revisiting

Even though household income has risen by 28% in the past 13 years, the cost of living has
increased by 30% in that same time period. So it’s crucial to reevaluate your budget every so
often to make sure your allocations are still feasible. Bill payments change, kids grow up and
start eating more, mortgage rates go up or down; these are all things that will make you have
to alter your budget. It’s also important to know your asset worth as well. There are many
borrowing opportunities available based on the value of assets such as your property. Most
people under the age of 35 have a median home equity of $20,000, which can be borrowed
against. Equity loans are great for things like college costs or having to pay for your daughter's
future wedding. As you update your budget, don’t be afraid to consider means outside of your
income for certain expenses. Although, you don’t want to get too borrow happy, which can be

Avoiding these mistakes can help you create a successful budget that you can stick to.

Now go forth and budget like a finance master.


  1. Excellent tips. I'm on a very limited income so I have to budget carefully. I still put some money in savings each month.


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