Archives For budgeting

Avoid a Budget ‘Wipe Out’!

Congratulations, you’ve got a budget in place (click here if you don’t), but now you’re in trouble. Something just isn’t working and your budget is busted. You’ve just made an epic budgeting mistake.

You’re not alone. We’ve all done it. Now learn and try to avid the same mistake again. If you can avoid these common budgeting mistakes you’ll be ahead of the pack.

10 Epic Budgeting Mistakes

1. Gas and Food- You are just getting a handle of how much you spend in these necessary categories. You’ve got to eat and get to work, so put a little extra in these categories in the first few months.

2. Not Tracking Expenses- Making a budget is only 1/2 of it. Now you’ve got to track those numbers. Don’t rely on your online bank statements for this as it won’t tell you which bills are due, what checks are outstanding, and pending transactions won’t show up on MINT.  There are tons of ways to do this yourself. Pen and paper, excel, envelope systems, personal finance software like iBank 4You Need A Budget (YNAB), or Quicken (affiliate links). Find what works for you and track your spending.

3. Forgetting Annual Expenses- Every year there are certain expenses you’ll need to pay like memberships, school clothes, christmas gifts, insurance premiums, etc. When you first begin budgeting you have to remember about these annual expenses, but most likely you’ll forget some important items. Example: Save $50 each month so you’ll have $600 in December to buy those christmas gifts.

4. Not Having an Emergency Fund- Unexpected events and expenses occur. An emergency fund of at least $1000 will protect you from an epic budgeting mistake and shield you from going into debt.

5. The ATM Monster Ate my Budget- You can $20 your budget to death and you have no idea where you spent it. Have a plan for how much cash you’ll get out each month and stick to it. You just might have to tell burger and fries it’ll have to wait till next month.

6. Being inflexible- Some months you just have to be flexible with your budget. Making a budget is more of like art than a science (especially with an irregular budget). Be flexible and willing to change, just make sure your budget balances. If you spend more in category, you’ll have to spend less in another.

7. Unrealistic with your Spending–  $100 worth of groceries won’t feed a family of four, even if you are an ulta-coupon saver. Be realistic in how much you’ll spend.

8. Not Having Fun- You need to blow some money or you’ll sabotage your entire budget. A bit of mad money in your budget allows some steam to seep out. Have absolutely $0 in fun money for a few months and you’ll likely go crazy and make a large purchase or go on a spending spree. It can happen. Have an amount of money each month where you spend anyway and anyhow you want. Your spouse doesn’t even get a vote on this money.

9. Trying to Budget Without your Spouse on Board– This just won’t work. One will be frustrated and the other will feel controlled. Get on the same page with your spouse before you begin budgeting. Read more about budgeting for couples.

10. Saying  ‘Yes’- This will cause epic fail. Want to go out to eat? Yes. Want to go to the movies? Yes. Want to meet for coffee? Yes. Want to have cocktails after work? Yes. With your new budgeting lifestyle you’ll have to say no more often and/or get creative. Want to go out to eat? I do, but it’s not in my budget. Want to go to the movies? Sure, your RedBox or mine? Want to meet for coffee? Sure! (take your home-brewed coffee or fill up your coffee mug at the office). Saying “Yes” too much is especially a common budging mistake for singles (Read more tips for singles here)

What epic budgeting mistakes have you made? Your mistake might help someone else win financially. See you in the comments. 

Photo by:  Denis Dore Photography (Creative Commons)

[This is part of my How to Budget Like a Pro blog series]

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Stay away from ATM machines, especially one with a cat.

I was once single and know that it can be tough to be financially responsible with no one guiding you to wise choices. I made a lot of mistakes financially because I was young, but also because I fell for some common mistakes made by singles.

Budgeting Pitfall for Singles

  • Eating Out- This is a huge expense for singles and its hard to say no. If you want to meet your friends or have a social life it will be at a restaurant, coffee shop, or bar. You’ve got to get out and mingle to meet Mr or Mrs. Right. You can always have dinner parties , drink water when you go out, bring your own home brewed coffee to Starbucks, and sometimes just tell your friends you can’t go out because you’re broke.
  • ATM- You can ATM your budget to death and have no idea where that $250 went along with those nine $4 ATM fee charges. Limit your ATM withdrawals. The $20 bill is not the new smallest currency available.
  • Tired and Social Buying- Have you eaten out for lunch or dinner because you had a busy day at work and were just too tired to pack your lunch or cook dinner? Join others on a shopping trip, just to be included? You want to be included and will spend money just to avoid being alone. Just ask the girl eating alone in crowded restaurant if she fears being alone?

Budgeting Tips for Singles

  • Accountability- As a single person you need a financial buddy. Someone who you can show your monthly budget to. This needs to be someone who both encourage you and also tell you “No! You are out of control”. This probably won’t be your club hopping buddy or new dress of the week girlfriend. Choose a friend or mentor who knows more about money than you.
  • Acceptance- As a single person, your value and worth is not in how you dress, what you drive, or how many Michelin Star restaurants you dine at. Your value is not in stuff. You have intrinsic value.

Got any more budgeting tips for singles? Add them to the comments below. 

(Photo by Cyr0z

[This is part of my How to Budget Like a Pro blog series]


Do you fight over pennies with your spouse?

If you’ve been married longer than 1 minutes, you’ll realize that your significant other views money differently.

You like to pick pennies off the ground and your spouse doesn’t even notice them. We use our money on what we value.

When your values are being violated you stand up for them, especially when the topic is money. A fight over money ensues.

Common Money Fights

  • Saver Versus Spender- When a saver doesn’t get to save, their sense of security is threatened. When a spender doesn’t get to spend their sense of freedom is endanger.
  • Mistrust- This can result in many forms and sometimes for good reason. Trust has been previously broken. When mistrust is present, suspicion, micromanaging, and control issues arise. This is not a happy relationships for either party.
  • Stress and Anxiety- When money is tight and bills are due, paying bills can get a little eh…tense. Have you been there? Also, many of your fights will occur when you are hungary, angry, lonely, or tired (H.A.L.T)
  • One Horse is Faster than the Other– When one of you is onboard the budgeting train and the other is left at the station disharmony will ensue. The spouse not onboard will fight and sabotage the budget (with a smile). The train conductor feels frustrated and alone.
  • “You Bought What?!”-Miscommunication is a huge contributer to money fights. When you don’t talk about decisions surrounding purchases, hurt and more mistrust ensues, especially when you overspend your budget.
  • Control Freak- One spouse just can’t let go control and allow the other make decisions about money. Eventually the controlled will burst or bolt.

Budgeting for Married Couples

1. Get on the Same Page- Communication and agreement about the values behind budgeting and money must occur. If you are having serious money problems you might need marriage counseling from clergy or another professional. Remember money issues are the number #1 reason for divorce, but they are also the #1 opportunity for in your marriage (Larry Burkett)

2. Do a Budget Together- Together is the key word here. See how my wife and I have a budget party each month and learn about budgeting nuts and bolts.

3. Decide Roles and Systems- Who is going to pay the bills each month? Who will track expenses? Where do we put our receipts? Basically decide who is going to do what and when.

Action: Discuss with your spouse any lingering money issues and start working together. 

(Photo by pfala)

[This is part of my How to Budget Like a Pro blog series]

Photo by Duncan

Are you weird in your spending? Are you outside the box of normal? How do you know?

It’s generally ok to be spending less than others unless its for savings or retirement. What we worry about is if we’re spending too much money in certain categories. We could all use some budgeting tips right?

Thanks to some smart nerds (have you ever met a dumb nerd) we’ve got charts that show how much you should be budgetting for certain categories. Of course if you’re super rich or live in relative poverty, these percentages will be off.

Keep in mind that if you are a little higher or little lower in certain categories, it’s o.k. Don’t freak out. Take a hard look at your situation and your budget to see if any adjustments need to be made. If you’d like a second opinion, I’d also be happy to take a quick look.

Obviously you can’t spend on the higher % end for all categories or you’ll be in major trouble. It is also recommended that you don’t try to save for retirement and pay off debt at the same time. Focus will have a powerful affect.

Recommended Percentages for Household Spending

Budget Category Percentage
Charitable Giving 10-15%
Savings 10-15%
Retirement 10-15%
Mortgage or Rent 25-35%
Food 5-15%
Utilities 5-10%
Clothing 2-5%
Transportation 10-15%
Health and Medical 5-10%
Recreation 5-10%
Personal Expenses 5-10%
Debt 5-10%
Mad Money 2-5%

Action: Examine at your budget and calculate the percentages you are spending in major categories. Determine  if any adjustments need to be made. Comments are welcome below.

[This is part of my How to Budget Like a Pro blog series]

Artists and freelancers are different. You think differently, sleep differently, and work differently. You live a gig life. Consequently this affects how you are paid and how you can budget.

Getting paid $5,000 for a commercial and not making a penny the next month. Dilemma. How will you pay rent and your SAG membership? What if Google introduces another Panda and your PR dives along with your income?

You’ve got to budget differently if you get paid per project, gig, or work off 100% commission. Keep in mind that budgeting with your unique lifestyle involves a bit of Improv (I love Monkey Butler) and ideally a larger Emergency Fund that those with a predictable income.

How to Budget with an Irregular Income

1. Determine the least amount you’ll make per month- Every month you’ll make at least X amount. This X amount can be budgeted like normal which I wrote about here.  If you’ve got months where you make nothing, you’ll need to find the lowest amount you can live on and have at least that amount in your Emergency Fund.

2. Rank your important expenses- There are certain expenses that have to be paid each month: Rent, Food, Transportation, etc. Rank all your normal expenses from top to bottom in order of importance. When money comes in or you have an amount greater than X from #1 above, start paying from the top of your list and go as far as you can. If you have extra money, put it towards debt or back into your emergency fund. Use this worksheet if you want to use pen and paper.

More Tips for Living with Irregular Income

  • Charitable Giving- If you come from a faith or lifestyle in which giving is important or integral to your spiritual life, then give first. For my family, we give first and then budget the remainder. If I try to give later down the road, then the money may already be spent by mistake.
  •  Taxes- If you are self-employed and/or receive a 1099, set aside enough money to pay your quarterly taxes or put them in a separate account to pay taxes at the end of the year.
  • Emergency Fund- Those of us who live off irregular income need a larger emergency fund. If you had a regular income you’d need $1,000 if you are in debt or 3-6 months of expenses if you’re out of debt. For Irregular Income earners, you’ll want to pad that amount and/or lean towards the higher 6 months-12 months of basic expenses of savings.
  • Give it Time- It may take up to a year to build up your emergency funds and to perfect your budgeting methods within your unique industry. But, hey you don’t do life normal anyway. Otherwise you’d have a boring day job.

How do you live on an irregular income? Do you have any suggestions or tips? Please add them to comments below.

(Photo by The Library of Congress)

[This is part of my How to Budget Like a Pro blog series]