4 Budgeting Mistakes You're Probably Making

Are you making these common budgeting mistakes? They could cause you to blow your budget.

Budgeting ensures your cash goes where you want it to. But a budget is effective only if you can actually live on it. Far too many people attempt to allocate their cash and fail. Impractical budgets simply don't work. 

Want to make sure you can stick to your budget? Here are four mistakes to avoid if you don't want to fall victim to common budgeting errors.

1. Budgeting with no idea of what you're spending

If you make a budget that's too far out of line with your current spending, it's more of a wish list than a practical guide to where your cash should go.

Yes, the purpose of a budget is to cut spending. But cuts have to be reasonable and sustainable. You can't cut the food budget for a family of four to $20 a week and expect it to be sufficient. 

To get an idea of how much cash to allocate for each expense -- and where you can cut -- track spending for around 30 days. Then see how your current spending aligns with your income. Finally, figure out where you can make changes to free up cash for retirement savings or other goals. 

2. Forgetting about irregular recurring expenses

Throughout the year, you have to pay for things that come up. Some of these expenses are repeat expenses that don't happen every month.

For example, you may have Christmas costs to pay once a year, an annual vacation you take in the summer, and your child's birthday in the fall. You'll need to spend money on all these things, but they can be easy to forget about since they happen only once a year.

To catch these irregular recurring expenses, look back at your calendar over the past 12 months when making your budget. Watch for things like annual car inspections or doctor visits that could lead to copays or repair costs. And don't forget annual membership fees, birthdays, vacations, and holidays.

Make a list of these irregular recurring expenses and budget a small amount of money every month towards saving for each one. If you save $20 a month towards your car inspection, for example, you could cover the cost of inspection and minor fixes you may need.

Likewise, save a small amount each month for holidays, birthdays, and vacations. When these events come up, you'll be able to afford them. 

3. Not leaving any wiggle room

No matter how carefully you budget, you can't plan for every surprise expense. If you've got every last dollar allocated for a specific purpose, any surprise expenses are going to throw your budget out of whack. 

To make sure you have the cash to cover unexpected expenses you incur each month, leave yourself a small amount of spare cash in your budget calculations. You could budget $50 a month for surprises, for example. If you don't spend the money, let it roll over or add it to your emergency fund so you have cash waiting when you have a bigger surprise. 

4. Failing to prioritize saving

For many people, part of the point of budgeting is to save more. If you allocate cash to spending first, this can be hard. Especially if you're spending so much that you have little money left over. 

After you pay your essential bills -- like food, housing, and transportation -- saving should be the next thing you budget for. Aim to start by setting aside at least 10% of your income each month. Ideally, you'll be closer to 15% or 20%. Then work the rest of your budget around the payments you're making to your savings account and distribute the cash left over.

By treating savings as a top priority and a must-pay bill, you can ensure that you budget enough to accomplish your goals and have more financial security in the future.

Avoid these common budgeting mistakes

By avoiding these common budgeting mistakes, you'll build a livable budget that helps you meet your savings goals. Just be sure to

• track your spending,
• account for periodic expenses,
• leave yourself a little wiggle room, and
• put saving money near the top of your list of essential expenses.

If you can do these four things, you should be in great shape.