Sense & Centsibility Blog

Top Three Budgeting Blunders

Budgeting is a great first step to financial wellness, but it won't save you from a crisis just by creating a budget. It takes a bit more work than that. So here are 3 blunders to avoid when you're getting started on the road to financial health.

Creating an unrealistic budgetLaptop

When you create your budget, make sure you use your take-home pay and not your gross income. This seems like a simple one, but if you make that mistake your budget will be busted right away.

You've accounted for your rent/mortgage, food, utilities, etc.  and because you can't afford extras like concerts or going out with your friends every week those expenses aren't in the budget. But the truth is you will likely go out with your friends or see your favorite band. And that's okay! You have to be realistic and plan for it. Try to make reductions in other areas so you can have a little fun, too. That way you can avoid the trap and vicious cycle of credit card debt.

Only looking at one month's expenses

So you've created your budget and think, "Yep, I have all my monthly expenses included." But don't forget about expenses that come up throughout the rest of the year. Don't let those planned periodic expenses turn into emergency expenses - because they're really not. You know that you have to renew your vehicle tabs/registration every year. And if you have a newer car, it's likely going to be over $200. Do you pay your property taxes or car insurance annually or every 6 months? Do you have an annual gym membership or do you get your hair done every few months? Be sure to account for these expenses in your MONTHLY budget and set aside money for what will be coming up in the near future.

Not budgeting for emergencies

As mentioned above, expenses you know are coming up are not financial emergencies, but emergencies do happen. Cars break down and people lose their jobs or get a reduction in income. If you're not setting aside money into an emergency savings account, you're guaranteeing a financial crisis in your life.

If credit cards are holding you back from having a successful budget, LSS Financial Counseling can help. Get started online with your free financial counseling session, or give us a call at 888.577.2227 to schedule your phone or in-person session.

Author Elaina Johannessen is a Program Director with LSS Financial Counseling.