Making a list: 4 budget pitfalls to avoid in 2015
Detour away from these common mistakes to help you get – and stay – on track next year.
Of course you have a 2015 budget prepared. You’ve updated the 2014 spreadsheet with anticipated
new expenses, perhaps some additional income, and even set aside some room for more retirement
savings, based on all the excess cash you had from keeping such a tight budget in 2014! No need
to read further.
Still here? You don’t have a budget? Or you do have a budget, but it reads more like a cautionary
tale than a best-selling how-to guide? There is probably at least a little bit of fiction in every budget,
but the uncertainty that comes from a leaky ledger can be stressful. Let’s take a look at the things
that can get in between you and a successful budget – along with some ways to avoid the stress
that comes with not having a firm grip on your financial future.
Pitfall 1: The budget works great on paper, but in real life…not so much.
There are several reasons for this pitfall, but two of the most common are not drilling down far
enough into your expenses when you start the budgeting process, and not making regular
adjustments to the budget once you’ve measured the budgeted amounts versus actual spend.
Making a budget is one thing; keeping one is a different animal.
Detour: Log your expenses more frequently and make sure they’re in line with what you set aside
for that particular expense. Hold on to your receipts so that you’re not relying on the memory of
how much a product or service costs you; this will help you not only keep better records, but it
will make you more aware of spending habits for the miscellaneous expenses that may not have a
line item in your spreadsheet.
Extra credit: Have you considered going to a cash-only system for the handling of day-to-day
expenses? There is no interest accrual charge for using cash, and the act of taking the actual dollars
out of your wallet makes it more difficult to rationalize spending above your means.
Pitfall 2: Budgeting takes too much work.
If you’re still using a paper, pen, and abacus, the budget may be a little more daunting than it needs
to be. Doing a budget properly will, indeed, require some effort. But don’t let the upfront work be
a roadblock, because the peace of mind and lack of stress you’ll experience from having a sound
budget will be its own reward.
Detour: Technology is your friend when it comes to budgeting, from software that’s been around
forever, to new smartphone apps that make logging expenses as easy as pressing a button.
Smartphone apps give you ease of use with the added touch of being able to enter expenses as they
happen.
Extra credit: Some national bank chains offer budgeting technology alongside online banking,
which allows you to keep track of all your finances in one place. Knowing exactly how much you
have in your account can help you avoid overdraft fees and other hidden costs that could negatively
impact the budget.
Pitfall 3: A lone budgeter is probably a poor budgeter!
Why? Because if you’re like most people, your budget is impacted not only by your spending, but
also by the spending of a partner or other family members.
Detour: Make sure those impacted by a budget know the details and the importance of making
and sticking to the budget. Sit down together and make a plan to determine how much spending
money you should each have. Then, check in regularly to gauge progress and see if adjustments
need to be made. One person shouldn't have to shoulder the entire burden alone.
Extra credit: Talk to a trusted friend, a family member or a financial advisor about your goals and
set up a structure in which that person holds you accountable.
Pitfall 4: The big raise, bonus or commission you were planning on didn’t come through.
When most people think of how to increase their savings or make a big purchase, they think in
terms of increases in their annual or monthly income. But those increases may not always be there,
or they may not be as substantial as you were planning. Income, though, is only half the story.
Detour: Lowering your expenses is another important way to save or make good on a tight budget.
Instead of buying new items or replacing items that are still in good condition, focus instead on
putting a new look on an old item, such as re-upholstering a well-worn couch or putting a fresh
paint job and new tires on a car that still gets you where you need to go.
Dipping into savings, buying on credit, or taking out a loan may seem like a quick fix, but consider
the long-term impact on your finances and your retirement goals. One way to take the sting out of
cutting back a bit is to reward yourself with low-cost items or activities. Carve out more time for
your hobbies. Cooking at home can save on both money and calories, potentially leading to lower
healthcare costs in the future. Find ways to make the goal-setting process a positive one with
rewards built in, so that working within your budget won’t feel punitive.