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Doing a budget correctly can be a beautiful thing. Seeing your account grow because you are spending less than what you are saving. But there are some budgeting mistakes that could easily break your bank very quickly.
In this article is going to be in response to a certain conversation that I had recently that a lot of people might overlook when they’re dealing with their budgets. I’m listing the Top 10 mistakes in budgeting that could potentially cause a lot of damage to your savings.
Many of the underlying mistakes are sometimes not noticed until months have passed and you look back and ask yourself “ where did my money go ?! “ So it is a good idea to form good financial habits from the Get-go .
Sometimes just saving $100 per month might be the difference between a great retirement and a shaky one. After all , My generation is known for spending our money on Starbucks and Avocado Toast ! or are we killing the Economy ? I can’t tell anymore ….
Some of the Tips mentioned are not for everyone or might sound too extreme , but this is only a suggestion to improve your savings and doing any one of these or all is sure to save you a significant amount.
The Scenario
We were being introduced to this new couple who had moved to the area recently, and we were talking about activities that are done in the area.
Naturally the conversation went to the cost of some of these activities, and my wife being frugal as I am and perhaps even more went further to give the options that were free instead of paid.
This prompted the conversation about money saving As the other couple proceeded to mention that money was tight recently. Through further conversation and investigation we understood some of the major mistakes that this new couple had been making.
And so The time has come to address the most common budgeting mistakes and ill throw in some tactics to counter those mistakes .
- Lifestyle Creep
Due to the fact that they had recently movers to the area they only knew a certain group of people, and those people were making far more of an income than the new couple are .
This led to some poor choices into buying what is trending from Clothes, bags, perfumes, TV’s, furniture and so forth.
There were mistakes on both ends so nobody should be getting mad about the other partner !
But more importantly the idea that you need to keep up with the trends around you just so that you can fit in is absolutely not the correct way to approach this.
Quick Fix : Simply Avoid keeping up with the Jones’s and be proactive in knowing what you need and how much you should pay for it.
- Cost of living increases
Moving from a lower cost of living area to a middle cost of living area might cause significant changes in your budget.and you will notice this one very quick.
It’s some of the things that you might overlook when you’re moving to a new area. The same things that you used to spend money on and was inexpensive have now become more than you can handle.
Food, rent, shopping, gas, schools all of these differ by the area that you move to and must be taken into consideration As the different can be an extra %10 to 15%.
You can use an array of Cost of living calculators (COL) for free online , this is my favorite.
- Subscribing to things you don’t use
This is another hidden drain on your savings, and it could be that this has been happening for years and you didn’t notice until you actually look hard enough in your past statements.
The old example was a gym membership that you never technically used. With the couple we met , they had a gym membership for $180 a month ! you can easily find other gym memberships for $8 a month.
More commonly this day and age is the number of online subscriptions to streaming services or duplicate subscriptions of the same nature such as Netflix, Disney, or Hulu, or even catch buying things constantly on Amazon using Amazon Prime when you don’t necessarily need that for fast and free shipping.
Each one of these can be an extra catch $15-$20 a month all the way up to $100 a month . Naturally cutting off these extra expenses and switching them for inexpensive ones would cause a great savings yearly.
Quick Fix: I am a Fan of some Netflix shows too , but here is what I do to get it for Free . Simply put I use a different email every year for the free month and binge watch my shows in that month. Any Streaming service with a free time frame will work , and what other way to Binge watch is better than for free ?!
- Buying brand names not generic
Brand names no longer have a great and significant difference compared to generics compared to 20 years ago.
Kroger’s generic name cereals are just as good as brand names – and just as unhealthy – sometimes generic quality is even better than regular brands for example Costco’s Kirkland versus pampers in diapers .
Not only do you get the same quality or better but you also get a larger quantity for the same or less price.
Quick Fix :There’s a very easy trick that I see very often when supermarkets and other stores discount brand names however when you compare those to their own generic brands the generics are always cheaper even with the discount ! So always check generic prices even if there is a “Discount” going on.
- Going more than one time a week to buy your things
This mistake is very common. you go to the grocery store three or four times a week, buying one or two items every time you remember, or immediately when you run out of something.
Not only do you end up putting yourself in a situation where you might have to buy something at full price, you also have to pay for gas more often.
You will find that this will quickly add up, especially with the price of gas fluctuating the way it has due to global influence.
The correct way to do this is to group up all your purchases once a week to the grocery store to buy everything in bulk and then not go for at least one week.
Quick Fix : In some cases when you go to warehouse that sell in bulk it would even be better if you buy months worth in advance. Allow me to explain :
There is a warehouse that sells food to restaurants in my city. we go there and By 40 pounds each of chicken, beef, ground beef, and any other type of meat we might need at a huge double discount since they are running a special and we are buying in bulk .
This allows us six months worth of cheap meat so we never have to buy from anywhere else. These are all stored in a separate upright full freezer that I also bought on discount !
- Not using Cashback
I mentioned this extensively in the Best credit cards of 2019 article ,how you optimally use credit card cashback for your purchases to gain a little bit of money back from the purchases that you’re already going to make .
I would say the best three credit cards for everyday use are the Discover it card with its rotating 5% cashback on some purchases, the Chase freedom unlimited credit card with the same 5%, and the Citi Costco executive visa credit card that gives 4% on gas and 2% on everything else from Costco.
- Wasteful use of Utilities
One of the things I notice a lot is the fact that utilities are being wasted constantly . People overusing , Dishwashers , Laundry , Lights , and Showers all cause waste and are actually quite expensive.
Electric Bills and water bills are definitely an issue with these types , cutting back just a bit might save another $50 a month .
Now don’t get the wrong idea , I’m not advocating for smelly people ! I am just against MULTIPLE showers a day ! I’m against wearing something once and then throwing it in the laundry or even worse throwing it away ! Yes you heard me !
Believe it or not , this is actually quite common and I have been noticing it too much . If this doesn’t apply to you and only shower once a day , and do laundry once a week , congratulations you are normal .
Quick Fix :
- Don’t buy Bottled water , use the Tap instead – unless you live in Flint, Michigan.
- A little known fact is some electric companies actually Lower the price of electricity at night , after 8 pm. So it might be worth researching this in your area and doing the laundry at night .
- Not selling or Donating Unused items
This is actually catching on more and more and it is due to the fact that people are buying more things because they may be a bit cheaper .
Selling your unused clothes on Facebook marketplace, Poshmark.com , or thredup.com could let you make an extra $100 a month and declutter your house .
If you like to buy things frugally and consistently this allows you to recreate your wardrobe often without wasting too much money , if any !
This also applies to Toys as well, With Kids growing up some toys end up being obsolete and even being boring after months of play .
Probably the biggest items to sell are old furniture . People are buying these items and fixing them up and reselling them for the difference and you’ll find really good deals to buy and sell on Facebook marketplace .
Quick Fix : Donating to Goodwill or Salvation Army might also be a good idea , If the donation is big enough this could lower your overall tax bill.
- Buying Seasonal items in Season
Buying Halloween Costumes , Christmas designs or lights , Or even thanksgiving ornaments can be a costly purchase every year. Even if you buy just one item a holiday, this could end up costing you thousands over the years
You always want to try to get the best deals at the right time , this also applies to major sales on items you need . Being patient is key .
Quick Fix : I Bought my Halloween costume for next year , right after this years Halloween for 1/10 the cost . For a family of four that could save you a hefty chunk for just choosing a different time of the year .
- Not doing research to find better deals
Buying everything from one place could make you lose all the benefits of a sale if you buy other items not on sale from the same place.
Stores will try to get you through the door through sale advertising and then try to up sell you other items not on sale , this evens out the potential loss in revenue from the sale .
Quick Fix : Always do your shopping from multiple places in one trip . We go to 3 different markets within a small driving distance . This ensures we will always get the best deals for lowest cost per trip.
Free Budgeting Template
Here is a Free Budgeting Excel Document to help you in the beginning of your Budgeting journey !
Even if you don’t have Microsoft excel you can still open this file Via your web browser using Google drive absolutely for free.
Follow the instructions on the first tab , and fill in every piece of information and detail you can think of . You would be surprised how much wasted money goes on little things and how quickly it adds up .
Budget-Template Download
We provided a budget template in an Excel sheets just fill it out with the different items that you could find from your statements and keep track of your spending every month .
You might be thinking ” Oh it’s only $10 a month , what harm is that ? ” Well if you have 5 of those “Harmless” little items , that’s $50 /Month which equals to $600 /Year . Now if you have not met the Company Matching in your 401(K), that $600 could potentially be losing you another $400 free money !
This is not even considering the lost opportunity cost of those dollars acting as an investment and bringing in %8 per year extra. It can Compound and add up very quickly and the losses will leave a bad taste .
On the Contrary , Doing these simple techniques and your future self 10, 20 , even 30 years will be thanking past you for ensuring your best financial future !
With time you will notice what Assets are bringing in income and what is falling through the cracks . Slowly you can improve on those aspects and cut your spending in multiple areas and you will see and feel the difference .
We also recommend using a budgeting aggregate like personal capital or mint.com. This allows in an app on your smartphone, to visualize how much you are worth, where your money is coming from, and where is it going.
There is always a concern of privacy when putting all this information online. However, in this day and age it is almost impossible to get the benefits of technology without using these sites. It is up to you what you wish to use.
Thank you for reading up this point and consider reading more posts here.
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