5 Budgeting Mistakes You May Not Realize You’re Making

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Pile of colorful erasers.

Unfortunately, there’s nothing like erasers to give you an easy redo on budgeting mistakes.

Once I started tracking my spending, I didn’t think there was much else to money management. After all, my debt was going down and my savings were going up—so everything looked right to me!

As time went on, though, I realized I was making mistakes with my budget … and I didn’t even know it. Here are five of these common mistakes. Check them out to see if they’re holding you back from reaching your financial goals.


1. Budgeting With Your Gross Income

Your annual gross salary might be impressive—but as much as 30% of it might be going to things like taxes, insurance, and union dues. And that’s all money you can’t spend.

Often, people look at their gross earnings when setting up a budget, not the amount actually deposited in their bank accounts (their net income). If you find that you’re getting to the end of your money before you get to the end of the month, make sure it’s not because you think you’re bringing home more cash than you really are.

2. Accepting Negotiable Bills As Non-Negotiable

Often, we accept paying more for a regular service simply because it’s the path of least resistance. However, if you spend 20 minutes negotiating a discount or bundle rate, you might be able to save money for months on things like your phone bill or cable bill. If you have a strong record of payment, you may even be able to reduce things like interest rates simply by asking—the worst that can happen is your creditor says no!

3. Spending Money Every Day

Whether it’s coffee in the morning or lunch with coworkers every workday, little expenses always add up to big spending. This may seem fine if you’re living within your means; however, it never hurts to go without spending money every day.

I’m not willing to cut out lattes from my favorite coffee shop completely, but designating 2 or 3 days a week as “no spend days” reins in my impulse buying habit. If you find you’re “accidentally” spending money when you don’t need to, leave your cash/cards at home at least twice a week. It’s a short, quick, and easy solution!

4. Using Plastic Instead Of Cash

I make this budgeting mistake to this day. I love the convenience of debit and credit cards because looking at my statements each month is easier than writing down every time I buy something.

Still, studies show that you spend 12% to 18% more when using plastic instead of cash. Apparently, it’s more psychologically painful to pay with real bills than with a credit card swipe. So, if you’re making this mistake too, consider switching to a cash-only system—it will leave you with more money to save and invest.

5. Thinking “Found” Money Doesn’t Count

Whether it’s a $50 bill in a birthday card or money you earn selling items on eBay, it’s easy to count extra income as “free” money and spend it as if it doesn’t count. A dollar is a dollar is a dollar, regardless of its origin, so it’s important to treat any extra cash that comes your way as help for meeting your financial goals.

One of the main reasons I was able to pay off my student loan debt is I put every extra dollar I received toward it, from babysitting money to extra cash earned tutoring chemistry. Every cent counts!!

Have you realized you once made a budgeting mistake? Share how you solved it in the comments.

(Photo: kayaker1204)

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