Just like any fad diet, budget gimmicks and tricks might work in the short term. However, they will leave you broke before the year is up. Proper budgeting involves a lifestyle change and a reprioritizing of your spending to meet your long-term goals. Whether you’ve been managing your money for years or it’s your first time making a budget, avoid these top 5 budgeting mistakes in 2022. These tips will help you go from broke to financially free.
1. Sweating the Small Stuff
Are you the kind of person who buys the cheap toilet paper, turns off all the lights in your apartment and drives with the window down instead of turning on the AC? Nickeling and diming your way through your budget might make you feel like you’re making headway. You should know that these little things might be keeping you broke.
Winning with your budget means managing your money when it counts. Saving $1.50 on your cereal isn’t going to make you retire early but sweating the big stuff will. If you make good financial decisions in these big 3 categories, then you can splurge on your toilet paper without feeling broke:
- Housing
- Transportation
- Entertainment
Instead of turning off all the lights in your $2,000 per month apartment maybe look for more affordable housing. Instead of rolling down the windows on your brand-new car, maybe blast the AC in your pre-owned car. After all, buying a used car is one of the best ways to buy a car.
Fix these categories first and you’ll never heave to sweat the small stuff again.
2. Setting and Forgetting
Budgeting is not just something you can check off of your New Year’s resolutions list. Proper budgeting requires weekly and monthly attention. Creating a budget is a great first step but setting the budget aside will leave you wondering why things went terribly wrong throughout the year.
Using one of the best budgeting apps is a great way to track your budget in real time. Using an excel or a scrap of paper might work for some but leveraging technology will help you track your progress on your budget.
3. Not Expecting the Unexpected
Nothing blows up a budget more than an unexpected auto repair. You’re a few months into hitting your budget and your check engine light turns on. You might be doing everything right when it comes to budgeting but if you’re not expecting the unexpected you could be left feeling frustrated.
Setting aside a rainy-day fund or putting aside a few bucks every paycheck can help you pay for those unexpected expenses. Although planning an unexpected vacation might feel tempting when you have a few thousand in your account, you might want to check the tread on your tires before you book that flight.
There are several things you can do to help you overcome unexpected expenses. The first one is to build an emergency fund. If you are specifically worried about unexpected expenses related to a used car you just bought, you may want to look into a used car warranty.
4. Not Budgeting for Fun
Budgeting might not be fun but that doesn’t mean you can’t include some fun in your budget. When you create a budget, it doesn’t mean no more concerts, movies or vacations. It just means you have to prioritize some expenses over others. Removing all fun from your budget will make you feel frustrated and questioning why you decided to make a budget in the first place.
The best way to keep some fun in your budget without breaking the bank is by creating a fun fund. Instead of thinking, “I can’t spend money on this” you should be saying “I get to spend this amount of money on fun every month”. Budgeting is about deciding what you want to do with your money. It is not about deciding what you can’t do with your money.
5. Worrying About Expenses and Not Income
The best ways to make a budget easier to maintain is by increasing your income. With the cost of living increasing every year, you can’t afford to keep your income flat. Instead of cutting out another $1,000 from your budget think of ways to increase your monthly income by $1,000 instead.
Here are some great ways to increase your income:
- Look for a higher paying job
- Get a side hustle
- Take some online certifications to change careers
Look Out for These Budgeting Mistakes!
Making good financial decisions when it counts, tracking your budget on a weekly and monthly basis, having a rain-day fund, budgeting for some fun and increasing your income will make 2022 better than 2021.
Don’t make these 5 budgeting mistakes this year and you’ll set yourself up for financial success!