Avoiding Common Budgeting Pitfalls


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Avoiding Budgeting Pitfalls

Done and done. Johnny and I just now got our October budget up to date. After only a week in, we’d already fallen behind! It’s been a crazy month already. Johnny is busier than ever at work, and I’ve been sick and caring for a toddler so our budget (and inbox and cat and house and hygiene… just kidding on the last one, kinda) got neglected. Not to worry… we were still spending money. We have no problem with that! We just weren’t tracking it. :) When this happens, as it sometimes does, we log in to Mint and record all of our expenditures to the budgeting app on our phones. And just like that, we’re all caught up.

We’ve found there’s no worse budgeting pitfall for us than falling behind on tracking our expenses. And luckily, it has a pretty easy solution. Even if it is a pain to go back and revisit past purchases (I really ate McDonald’s for lunch on Monday?!), it’s totally worth it.

Here are a few other ways Johnny and I try to avoid common budgeting pitfalls:

Don’t over-categorize.

If you’re like Johnny and me and you like making lists, you may find yourself faced with over-categorization. You have a category for everything: hair products, kitchen soap and cleaners, outdoor toys, etc. The problem with having too many categories is that it becomes very tedious to track a budget. And sometimes it’s difficult to estimate your monthly spending on smaller categories. To abate this problem, Johnny and I have a category called “Everything Else” (details on it here). In short, we pile all of our smaller discretionary categories into it, and as long as we keep the total spending below a specified amount, we’re good.

Do give yourself personal spending.

I probably sound like a broken record with this tip, but it has really helped us have success with budgeting. Having personal spending has always helped other areas of our budget feel less stifling. Sure, we have to watch our spending in every category, but each month I have a certain amount that’s mine to spend as I please. And I don’t have to consult Johnny about it (and vice versa). And it doesn’t have to be much. When we were getting out of debt, it was only $20 each per month (and it’s not much more now). But that’s enough… I can buy a book, nail polish, etc., without feeling an ounce of guilt.

Do give yourself incentives and specific goals.

When we’re budgeting, we usually try to work toward a specific goal so we have a reason for the madness. For a while, we were paying off debt. Then we were building our emergency fund. Now we’re just working to save more money toward a future house fund.

But that’s not all we do. We also reward ourselves for our efforts. We are mere children in adult bodies, and this kind of thing works for us. And I think it would work for most people! It might go a bit like this: “Okay, dude (we’re tight like that), if we can keep our budget for the next three months, we can each get a new pair of shoes.” Or “If we save more than X amount this month, we can use the excess to buy Y.” It’s simple, but it’s effective… and fun :).

Those are our major pitfalls and how we deal. What are some of yours, and how do you combat them?

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19 Comments

  • Reply Mrs. Frugalwoods October 8, 2014 at 7:33 am

    Using Mint is a lifesaver! We just export all of our expenses from Mint into a spreadsheet at the end of every month, which is so simple and so perfect. I agree with you–it’s crucial to look at every single expense and see exactly where the money is going.

    • Reply Joanna October 17, 2014 at 2:09 am

      Yes, it’s impossible to keep mental notes of it all. You have to have it stored somewhere!

  • Reply Deb @ Saving the Crumbs October 8, 2014 at 10:46 am

    I have to be honest, until I married my husband I wasn’t sure why anyone budgeted. I just assumed I would spend the very minimum I could and would save the rest. Why anyone would want to set an amount to spend was nonsensical to me when my ideal was zero and I just got as close to that as possible. Now that my husband has shown me the benefits of budgeting (and we have more expenses), I understand a lot better the different mindset and especially the value of your 3 points (but I do need to work on #2).

    • Reply Joanna October 17, 2014 at 2:09 am

      I was the same way! It’s crazy how much you can save when you’re actively budgeting!

  • Reply Aldo @ MDN October 8, 2014 at 10:56 am

    When I first started keeping track of my expenses and keeping a budget I over-categorize so much that it was impossible for me to keep track. Now I have a simpler method that allows me to keep track easier.

    I also have a section of “Things for Aldo” because I need to buy things for myself as well.

    • Reply Joanna October 17, 2014 at 2:10 am

      We did, too. We have simplified our budget a ton over time!

  • Reply Jason October 8, 2014 at 4:00 pm

    Please post a screenshot of your budget screen in the HomeBudget app. I’m having trouble over categorizing because I don’t want to become too general and not be able to accurately track expenses.

  • Reply Sarah October 8, 2014 at 8:12 pm

    Hi! My husband and I are huge on “telling our money where to go.” We actually don’t even leave room for “personal spending” which is something we need to work on. I think by not having that category, we wind up a little more loose with our money and save a bit less each month than we could. I’m going to have to chat with him about this tonight!!

    • Reply Joanna October 17, 2014 at 2:14 am

      Personal spending really helped us not resent our budget so much. Give it a try, and let me know how it goes!

  • Reply Halsy October 9, 2014 at 4:06 pm

    We use the HomeBudget app and it’s great but my husband often forgets to put in receipts. It’s a work In progress . We both committed this month to entering it in app as soon as receive the receipt. We also probably over categorize. I have always been intrigued by your guys “everything else” category method! We are just not at a point where we have a personal spending allotment. We just don’t spend money on ourselves. But we do have a small eating out and entertainment budget so that helps! This month we are trying to pre plan our eating out so the money doesn’t disappear on fast food and pizza :)

    • Reply Joanna October 17, 2014 at 2:16 am

      Amen! I hate when we spend our eating out budget on gross fast food instead of nicer meals. And kudos on entering in receipts! I’m the one in our relationship who tends to throw them away or lose them without realizing it!

  • Reply Myles Money October 10, 2014 at 9:15 am

    Budgeting is key to understanding where your money is going and to deciding how you want to spend it or how you want to invest it for your future. Everyone has a dream or a plan, but without a budget, how would you know if you can afford it? It still amazes me how few people budget their finances.

    • Reply Joanna October 17, 2014 at 2:17 am

      Yep, budgeting is the foundation to making and keeping all of our financial goals!

  • Reply Little House October 10, 2014 at 9:38 am

    I use Quickbooks and it tracks all of our categories (that I set up years ago), then I backwards plan our budget to fit within that model. It works pretty well for us, we only really struggle with a couple of categories, one which is groceries! I gotta get better at that one.

    • Reply Joanna October 17, 2014 at 2:18 am

      That’s great! I struggle with groceries, too… I can control my clothing spending, but not my grocery spending? What’s with that?

  • Reply Jason October 11, 2014 at 3:30 am

    Groceries is huge for us (unfortunately). We are budgeting $800 a month for groceries! We’ve tried the whole couponing thing, but it always becomes too time consuming for us.

    • Reply Joanna October 17, 2014 at 2:20 am

      We haven’t been able to find the time for much in the way of couponing, either. If your grocery budget is a sticking point, maybe you can find other categories where cutting back is more feasible.

  • Reply Slinky October 17, 2014 at 6:08 pm

    I agree about not over categorizing, but under categorizing is bad too. My general thinking is that if you ever look at a category and aren’t sure exactly what’s going on or why you are having problems there, break it down. If a category isn’t providing any value on it’s own, combine it into a larger category.

    For instance, I once tracked coffee spending in it’s own category. I was concerned about how much I was spending on social coffee runs with coworkers. So, I gave it it’s own category and set a limit as to how much was reasonable and tracked it. After a while, it became clear that spending was fairly consistent and well under my reasonable limit. So I lumped it back under restaurant spending and continued on.

    Personally, your “Everything Else” category gives me the heebie jeebies! How on earth can you tell if you went over because of too many books or an unexpected gift or a big medical bill? What I went over on and why dictates my future actions. If I’m just buying too much stuff, I need to actively reign that in. If it’s unexpected stuff, I might need to plan ahead better. If it’s an emergency, I probably just need to recoup and adjust my savings goals.

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