3 Ways You May Be Sabotaging Your Budget
How many budgets did you have to try before you finally got it right?
You worked hard on making your budget. All the tears that went into planning your money for next month. It finally looks perfect and ready to be set in motion.
You go about your month spending according to your budget and maybe you fudged a little here and there, but overall everything seems to have worked well.
That’s until you sit down to reconcile the budget at the end of the month.
Something went wrong and you went way over the budget plan. Frustrated, you start entertaining the idea of just giving up altogether. I’m here to tell you…
Don’t give up!
Your household budget is the key to financial freedom and future wealth. It’s the best way to get control of your money instead of your money getting control over you.
It took me almost 2 years and 3 different budget styles to find one that worked for me. The reason it took me so long to get my budget right was because I was making budget mistakes no one else was talking about (or maybe I just didn’t read the directions properly)
There were 3 big things causing me to sabotage my budget efforts. Keep reading to see if your making these same mistakes.
A budget gets control of your money before money gets control over you.
Aside from all the obvious reasons you may be sabotaging your budget:
- Eating out too often
- Giving in to your coffee or book habit
- Impulse Amazon buys
I want to cover the “Not-So-Obvious” reasons.
Things that you may have been doing but don’t even realize it could impact your budget.
#1. You’re Not Tracking ALL Your Money
When I started doing a budget in 2014, I had this genius idea that I didn’t need to count the money going into my savings because I wasn’t planning on spending that money anyway.
For some reason, I thought if I didn’t track the money going into my sinking funds, then I wouldn’t be tempted to use that money.
Turns out, it was a dumb idea. Not tracking your savings leaves a hole in your budget the size of, well the money you’re not tracking. And, it’s just bad practice not to track your savings anyway.
If you’re doing this, please stop.
I like to think of money similar to water. To make the best use of water, you need to direct every bit of it to where you need it to go. Same with money…'If you don't tell your money where to go, you'll be wondering where it went.' ~ Dave Ramsey/John Maxwell Click To Tweet
Leaving parts of your income out of the budget will throw off your calculations. And it makes things harder to keep track of. You’ll have to remember not to count the money every time you budget. And if you’re working with a highly-detailed budget, like a zero-dollar budget, be ready for total and utter chaos.
Hiding money from your budget doesn’t work because, if you’re like most people, you’ve allowed your current living expenses to be based on the level of your income. In other words, you’ve probably allowed expenses (aka: debt) into your life at the level of what your current income can handle.
When you leave money out from the budget but still have the same expenses, you almost always end up in the red.
Because you’ll still have the expense but not the right amount of money coming in. Your budget will show you’re overspending when you really aren’t…or are you?
For your budget to work properly, you must be honest and track every bit of income and expense, no matter where it’s coming from, or going to.
#2. You Have Too Many Bank Accounts
I’m not talking about money market accounts, certificates of deposits (CD’s), or investment accounts. I mean the simple, checking and savings accounts that people use for everyday savings and payments.
I know of a nice couple that has 12 bank accounts in 3 different banks. One for the kids, one for the spouse, one for plain savings, one for special savings, a checking for gas and food, a checking for online shopping. Their list goes on. And on.
I’m one of those people who thought maintaining multiple accounts was smart and organized. It seemed innocent enough to have 10 different accounts in 5 separate banks (not including the one I use for business).
Turns out, I was wrong…again.
If you’re doing this, you may want to reconsider:
Having multiple bank accounts may be sabotaging your budget because more accounts mean more tracking. More tracking leads to confusion and higher possibility of errors.
If you’re using a spreadsheet to track finances for numerous accounts, chances are you’re going to miss something. And if you use an online tool like Mint.com, it only adds to the confusion when you look at the list of transactions.
Mint doesn’t know the difference between your transactions, so if you often transfer money from one account to another, you’ll see duplicate transactions.
You end up having to spend the extra time sorting things out. And sometimes it’s like trying to herd cats.
If you’re going to track ALL your money, make it easy on yourself. Don’t try to wrangle multiple accounts every month.
For simplicity, all you really need is one checking, and perhaps 2-3 savings accounts depending on your personal needs.
Keep your bank accounts simple so you can easily track all your money.
Make it easier to run a successful budget by minimizing your accounts. The less you have to track, the easier it is to watch where your money is going.
#3. You’re Still Using Credit
You’re still using credit cards and revolving lines of credit.
Most people hang on to their credit cards for various reasons. For emergencies, for the rewards, or to keep up their credit report.
The honest truth is 1. you don’t need a credit score to survive. 2. The rewards you get for the amount of debt you need to put yourself in aren’t worth it. And 3. if you didn’t have so much debt, you could quickly save up an emergency fund (which reduces your need for credit).
If you’re using credit cards or revolving lines of credit to purchase things, you may want to reconsider:
People using a credit card are prone to spend 12-18% more money than they would than if they were paying with cash. Pay for your everyday expenses with a credit card and you may be putting your budget in the red without realizing it.
On top of that, using a credit card makes tracking money more complicated than it needs to be (hello, one more account to track)
To reduce your dependence on credit, you may have to cut expenses. Which, by the way, is a happy side effect of doing a budget; you can see where you’re overspending each month so you can stop it.
My Final Two Cents
If you’re having trouble getting your budget to work and your numbers just don’t come out right at the end of the month, take a step back to see if these things may be throwing a wrench in your budget.
They certainly did for me, and it took almost 2 years before I figured it out.
The best way to manage your budget is to make it as easy as possible for you to keep track of your income and expenses. And to make sure your expenses never exceed your income.
A quick recap of the things you may be doing to sabotage your budget:
- You open the doors for errors if you’re not tracking all of your money.
- Having to track too many bank accounts can be frustrating – like herding cats.
- Using a credit card complicates things and opens the door for you to spend more than you make – without you realizing it.
These are my 3 biggest budgeting mistakes.
Have you made any of your own?
Share in the comments! 🙂
DISCLAIMER: None of the links in this article are affiliate links. I am not a certified financial advisor. All the ideas expressed in this article are to be taken as entertainment only. Any and all decisions to follow the steps in this article will be done so at your own risk. It is recommended that you do your own personal research and consult with a certified financial advisor first (or read the Total Money Makeover by Dave Ramsey). Despite this disclaimer, please know that I’m self-educated in, and have experience with, personal money management. I have thus far paid down approximately $9000 of debt (2015-2016), and the ideas mentioned in this article are experiences from my personal life which I feel could help other people – like you – looking to change their money situation.