Your monthly budget this year could be just what you need to help pay off debt, make payments on time and save for emergencies or large purchases. If you want to put together a 2022 budget that works, make sure you avoid these eight common budgeting mistakes.
Not having a budget
One of the biggest budgeting mistakes you can make is not having a budget at all. If you’ve been winging it every month by keeping track of bills and due dates in your head and pulling out your credit card for most purchases, that’s a recipe for overspending.
Guessing at monthly bills
You may have to go by rough estimates on a few budget items for the first month or two. However, once your budget gets rolling, you should have a good idea of how much to allocate for rent, mortgage, car payments, insurance and everyday expenses. Pay attention to how much you spend and then adjust accordingly.
Failing to track spending
Once you have a budget, track your spending to make sure you’re staying on budget. Knowing how much you spend each month or week can help you see whether the budget you have is working or needs to be tweaked next month.
Allocating big bills to one paycheck
It may seem to make sense to allocate most of one biweekly paycheck to the mortgage or rent and the other check that month to car payments, health insurance or another hefty expense. However, it’s better to allocate an amount from every paycheck to large recurring expenses.
Budgeting on the low side for certain items may feel good when you put the budget together, but if it’s not realistic, you could get discouraged and end up ditching the whole budget.
Leaving out annual expenses
Don’t forget to allocate money for savings designated for annual expenses like property and income taxes, as well as auto, homeowner’s and renter’s insurance, too.
Not budgeting for emergency savings
Make sure you budget at least a small amount each month toward emergency savings. That way, when there is an expensive emergency, you’ll have enough savings to cover it so you don’t have to make late payments on other bills.
Totally depriving yourself
Your budget may look good on paper, but if you deprive yourself of all pleasures when preparing the monthly plan, you could resent the budget that took away too many things that you love.