Did you know most Americans don’t have the money to cover a $1,000 emergency? That’s a pretty scary thought as little setbacks will occur every now and again and having to go into debt or be thrown off financially with a little setback is no way to live your life!

In this guide, we’ll go over the top budgeting mistakes to avoid. You will learn how to revamp your finances to better master your money! Want to learn more? Keep reading.

1. Forgetting About an Emergency Fund

Do you budget for your expenses every month, but don’t consider your savings? You want to set aside money for your savings, particularly an emergency fund. As stated in the first paragraph, it’s really not a matter of if you’ll face a financial setback, more of when.

 Life emergencies can happen at any time. A reasonable budget will include funds for these kinds of occurences.

Make your emergency savings a top priority. You can put away at least five percent of your income each week. Once you hit a goal of $500, set a new amount to reach.

Work toward saving up to six months of life savings. This way, in the event you lost your job, you can still cover your bills while job searching.

2. Not Tracking Spending Habits

Avoid making this mistake by taking one hour to add up expenses from the month. Begin with fixed expenses like your car payment or mortgage.

Look at your credit card accounts and bank to determine how much money you take out of the ATM. Don’t leave any guesswork when you create your budget. Know what your living expenses are for every month.

Knowing how much goes in and out will help you organize your spending. You might notice you spend too much in one area. Aim to curb your spending and start saving your emergency fund.

3. Forgetting About Daily Spending

You can’t begin a budget at the beginning of the month and not check in until the end. You will need to track what you spend every day.

Make sure you record when you spend at a coffee shop or convenience store. You could discover that your daily lunch out is throwing your budget off track.

To start a money tracking habit, give yourself a small goal. Track your daily expenses for one month. By the end of that month, you’ll have a clearer understanding of where you’re spending the most.

You could try using a budgeting app. This way, you can enter the information into your phone after you spend money.

4. Making the Budget Too Tight

All budgets will need some wiggle room. Otherwise, you will feel discouraged if a surprise expense comes along the way. Try to add a cushion to your budget at the beginning of the month.

Make sure you set aside five percent of your total expenses. If you don’t use the extra money at the end of the month, you can put it into your emergency fund.

But if you do need it, you won’t feel like you’re taking the money away from your savings goals.

5. Not Setting Aside Money for Leisure Activities

A budget might make you feel as if you have no room for fun activities. If you don’t give yourself any spending money, you could get discouraged. You will feel frustrated and could end up spending more.

You’ll need a bit of money to enjoy things outside your budget. Consider giving yourself an allowance for each month.

You can set aside money to go to the movies with a friend or head to a local art gallery. Make sure you continue to do things that bring you joy. Give yourself an allotted amount and stick to it.

If you think you might overspend, take out the allotted amount and put it in an envelope.

6. Not Including Your Family

Do you have a partner or children? Make sure you talk about your new budget. You want to share your goals and how you will achieve them with the new budget. If you don’t have a conversation about the budget, spending can get out of hand.

Avoid this mistake by setting aside time to talk about your budget. Head out for coffee or sit down at the kitchen table on Sunday night. Talk about your shared goals and go over the spreadsheet.

You and your partner can track your spending expenses and see if you’re overspending. Keep the conversation flowing about your budget. This way, you’ll both notice any budget problems.

You might not agree on every part of the budget. You both might have to compromise on a few things so you can achieve your savings goal.

Do you have teenagers in your household? Encourage them to read helpful resources on budgeting. They can check it out here. 

7. Forgetting to Update Your Budget

Do you notice that your emergency fund is growing? You might feel less stressed about your finances.

Yet, don’t forget to update your budget. You might be doing well, but you want to make sure you review your budget.

Set a reminder on your calendar. You could check-in at the end of the first quarter. Review your budget, so you still feel confident about the numbers.

Have you experienced a recent life change? Moving to a new home, getting a new job, or a significant expense can shift your budget. Tweak your budget so you can stay on track of your financial goals.

Now You Know More About Budgeting Mistakes

We hope you found this guide on budgeting helpful. Take the time to write out all your fixed expenses and incoming money.

Begin saving for an emergency fund. Avoid these budgeting mistakes, and find financial freedom.

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