You may have tried out budgeting before, for your household bills.
After a couple of attempts, you gave up because it all became a bit too much.
Or you just didn’t realise there was a payment coming and you felt bad about your budget failing.
Does this sound like you? It definitely was me in the past! I have tried many times to stick to my budget, but there were certain things I was doing, that I wasn’t even aware of.
Here are some of the budgeting mistakes I have made in the past, and that I have learned from.
This is to the point where my budget is now helping me create the life my husband and I really want, right now.
1. Budgeting for a ‘standard’ month
My first few budget attempts were definitely trying to budget my money wisely. I was aware that I was overspending in certain areas and was frustrated by money trickling through my fingers.
So I set myself an absolute budget. This was a budget that I said to myself, that I would stick to. But, it just didn’t work, because every month is different. There was the car insurance yearly payment one month, and then the next month I had a council tax break month, so I didn’t have to pay this.
Always set your budget looking at payments coming up for the following month. Every credit card statement will be a different payment amount, for example, or maybe you will be paid less next month.
The easiest thing to do is to review your monthly payments, payslip and any communication you have received about one-off payments.
Do you have an up-coming expense such as vacation money, or a dental appointment?
Other things that could catch you out on your monthly budget:
Energy bill rises
Rate increases on credit cards
Rate increases on mortgages
2. Forgetting regular expenses
This is one budgeting mistake I have made a couple of times.
For me, the easiest way to ensure I have noted down all payments, is to go through my bank statement, to check what comes out when. If I go through the list in date order, I am usually accurate with my budget categories and regular expenses.
3. Overspending and telling myself it’s what I need.
The human mind is extremely creative at giving excuses to make everything okay. I had made this an art form. The result - an overspend. Really when I think about what I spent this extra money, telling myself ‘it’s what you need’, I actually could have found a way around it and found a solution.
Then my budget would have balanced.
I’m not saying this is easy - to walk away from something you are telling yourself you need, but this must happen to balance the budget.
One day, I had a breakthrough, when I tried cash envelopes.
I had a problem spending too much on coffee. Online, I’d heard of Dave Ramsey’s cash envelope technique, so I thought I’d give it a go.
Read more about it here.
Because I have a finite amount of actual cash inside my coffee cash envelope, I can see it disappearing as I spend it. Surprisingly, it turns out that visually seeing the money works for me. So from then on, for items on my budget that I was likely to overspend on, I have used this technique.
I haven’t gone over budget in these areas since!
Read more about my take on the cash envelope system.
4. Having no budget goals.
To be successful with your monthly budget you must set yourself financial goals. Yah they sound big and scary but they’re not as hard to set as you think.
Before I set financial goals for myself, I found that there was not as much motivation to keep on the plan I had set myself.
Financial goals, for example, could be:
- To pay of a certain amount of credit card debt.
- To save for an emergency fund of £1000.
- To get out of overdraft within 12 months.
- To retire earlier.
- To have $100 spare at the end of the month.
Now, my main financial goal,is to pay off our mortgage within 10 years.
Phew - £106,000 in 10 years sounds scary, but I have set myself this challenge and I’m throwing all our spare cash at it every month. I am able to do this because I previously set myself achievable goals of paying down all our other debt, and paying off the car loan.
The cash I was using to pay off the debt and loan, now goes straight to overpay the mortgage.
We haven’t allowed ourselves any ‘lifestyle creep’. This is when you start spending more, because you have more spare cash.
Mr Budget and I also have a vision of what we want to do more of, when we have paid down the house. For us, I have movie scenes of us being able to visit the US more and travel more in general.
This visualisation of what the end goal looks like has helped me not spend that cash!
Pin me for later!
5. Having no flexibility
Another budget fail, that I have done in the past, is to make the budget so tight, that there’s no room for flexibility at all. Basically, I used to set myself straight up for failure and feeling demotivated.
A way of overcoming this, is to build in a sinking fund, every month, that can be used as a cushion, when costs might be different to what you originally thought.
At the moment, my sinking fund every month, is £50. It just gives me that reassurance that this money can be used to cover, say an expense that no-one can predict. E.g taxi fare, that birthday present you have to buy for a child’s party; or that gas for the course you have to attend, as part of your job.
Some more ideas for what you can use sink funds for:
6. Having a budget that didn’t fit who I am and how I like to live
When I first started budgeting, I used a spreadsheet. There was nothing wrong with it, but I use to disregard it every month, and my budgeting wasn’t improving!
I figured out, that I found it boring and not very visual to look at. Along with figuring that I needed real cash for some budget areas, I researched into how people motivated themselves.
Some people were creating cool, colourful envelopes and recording their budgets manually. Their budget sheets looked awesome and I could feel my enthusiasm growing. It sounds ridiculous but I get excited now, when I think of setting my budget for the coming month. It’s the whole thing of choosing my budget sheet and which cash envelopes to use.
These are my latest creations and I love them! I call them my Victorian style cash envelopes!
Let me know in the comments, what your unique ways of budgeting are.