Common Budgeting Mistakes

A few common budgeting mistakes include not sticking to a budget, leaving out expenses, leaving no room for personal spending, creating an unrealistic budget, and not having savings involved. 

Building and maintaining a budget is one of the best financial habits you will ever form. However, many people still don’t do it. According to a survey by Penny Hoarder, 55% of Americans do not budget.1 Looking at your money through your budget will make tracking expenses easier by clearly showing you how much you have and where it needs to go. 

Let’s break down some common mistakes now and find ways to catch them early and get that clear view of your money.

What Is a Budget?

Simply put, a budget serves as a spending plan detailing your income and expenses. It lists different necessities that can be categorized and prioritized to cover your financial needs effectively.

How To Build a Personal Budget

These are some steps you can follow to build a personal budget:

Understand Your IncomeGather all sources of income including pay stubs, bank statements, etc. Calculate your net income after taxes, especially if self-employed.
List Fixed ExpensesIdentify all fixed monthly expenses such as rent/mortgage, loan payments, insurance, etc. These are regular payments that don’t change from month to month.
List Variable ExpensesNote down variable expenses which fluctuate each month, like groceries, utilities, transportation costs, etc.
Include Personal SpendingAllocate funds for personal spending such as entertainment, hobbies, and dining out.
Plan for SavingsDecide on a specific amount or percentage of your income to save each month. Include this in your budget as a non-negotiable expense.
Set Up an Emergency FundStart building an emergency fund to cover unexpected expenses. This should be separate from your regular savings.
Prioritize and AdjustPrioritize your expenses based on necessity. If your expenses exceed your income, look for areas to cut back.
Review and ReviseRegularly review your budget to adjust for changes in income or expenses. This helps you stay on track and make necessary adjustments.

What Is a Common Mistake Made in Budgeting?

If you’re working with a budget every month, congratulations! You’ve already got the hard part out of the way—getting started. But, since you’re human, you’re going to make some budgeting mistakes. Let’s take a look at some of the most common budgeting mistakes.

You Didn’t Stick To Your Monthly Budget

Budgeting monthly is one of the most manageable ways to stay financially organized. But, the only way that it can work is by accurately anticipating your spending needs.

You may have the same creditors to pay every month, but that doesn’t mean that you’ll be spending the same amount every month. Failing to adjust for monthly fluctuations is a common budgeting mistake for beginners. For example, you may buy lots of gifts during the holidays or use less electricity in the summer. These factors will mean making changes to your spending categories.

Not Including All Your Expenses

A budget works best when you include all parts of your spending. Many people will try to budget but fall short when they don’t include the little things. For example, it’s great that you’ve planned for your phone bill, but what about the $3 you spend every weekday at your favorite coffee house? That’s over $600 in annual spending that you aren’t accounting for! You can make better decisions when fully aware of how your spending habits affect your cash flow. Like brewing coffee at home!

Not Planning Your Fun

No matter what is going on, relaxation is critical to your overall health. You don’t need to have “extra money” to do fun things. Instead, you need to plan for your fun.

Create space in your budget for seeing movies or going out with friends. Or, you can make a long-term plan to do something big, like a dream vacation or a concert featuring your favorite performer. If you use your budget to plan for fun, you can make it manageable.

Living Outside Your Means

When you list your expenses, you may discover that some life changes may help your cash flow. Sometimes we identify our wants as needs and overspend in some instances where we could have saved a dollar or two.

It can be a tricky process to get rid of the little comforts in life. However, with budgeting discipline, you can set goals to eliminate debt or other expenses that will allow you to have money for all the little extras. Learning how to budget on a low income is very important.

No Savings Plan in Your Budget

We learn early on that paying bills is essential, but beginners’ budgeting plans rarely include paying themselves.

Even if you start budgeting small, setting aside savings should be second to caring for your basic needs. When you retire or are unable to work, your savings account can be a safety net that keeps you afloat until you can get back on your feet. When the unexpected pops up, your bills will still be due. Having a savings account will help make sure you stay on top of things.

Not Building an Emergency Fund in Your Budget

An emergency fund is an account that has money set aside to cover unplanned expenses in life. This fund holds the cash you would need to handle issues like sudden health care needs, a car repair, or a loss of income. Having this can help you avoid bad debt such as payday loans, title loans, or cash advance loans

There are two essential things to remember about emergencies:

  • You will have one at some point in your life
  • You don’t know when it will happen

A good long-term goal is to build a fund that has money to cover three to six months of your expenses. 

You Didn’t Make a Budget at All

There isn’t a budget mistake that will do more long-term damage to your financial health than not creating a budget at all.

When people don’t make a healthy financial plan for their spending, they set themselves up to overspend and run out of funds to pay their necessary expenses. With no budget goals to meet, the chances that you will be able to save for big purchases (like a home or a car) are slim. And funding your retirement without a budget will be next to impossible; living on a fixed income requires a great deal of financial planning and forecasting.

FAQs About Budgeting

How can a $100 loan affect my fixed expenses?

If you’re considering a $100 loan, it’s important to understand how it fits into your fixed expenses. Remember, the repayment will be an additional fixed cost each month. Make sure your budget can accommodate this without straining your essential expenses.

Can I use a $100 loan for unexpected expenses?

Absolutely! A $100 loan can be a quick solution for unexpected expenses. However, it’s wise to consider this as a temporary fix and not a regular part of your budgeting strategy.

Should I adjust my spending habits when taking a small loan?

Yes, it’s a good idea to tweak your spending habits slightly when you have an extra debt payment. Even for a small loan like $100, being mindful of your expenses ensures you can repay comfortably without impacting your financial goals.

What are the biggest budgeting mistakes to avoid when taking a small loan?

One of the most common budgeting mistakes is not accounting for the loan repayment in your monthly budget. Also, avoid neglecting your savings or emergency fund just because the loan amount seems small.

How do I ensure my debt payments don’t disrupt my budgeting strategy?

To keep your budgeting on track, prioritize your debt payments alongside your essential expenses. Consider using budgeting tools to help allocate funds efficiently.

Is it necessary to have a checking account for a $100 loan?

Most lenders require you to have a checking account for a $100 loan. This account is used for both the disbursement of the loan and the repayment. Ensure your account is in good standing to avoid complications.

How can I use budgeting tools to manage a small loan effectively?

Budgeting tools can be incredibly helpful in managing small loans. They can help you track your fixed costs, monitor spending, and ensure you’re on track with your debt payments and financial goals.

Conclusion With CreditNinja

Budgeting is a big part of being financially stable. And learning what it means to be financially stable will benefit you for years to come.

Making common budgeting mistakes will happen. Be okay with that, and know that many of them are inevitable; sometimes, we learn best from our mistakes. Stumbling down your financial path is not a failure. Just be sure to pick yourself up and keep working towards a solid financial future.

For more stats and facts about financial health, visit the CreditNinja blog! You can learn some holiday budgeting tips and about the best budget plans for couples


  1. These Budgeting Statistics Show Most of Us Don’t Track Our Spending | Penny Hoarder
  2. 10 Steps to Financial Security Before Age 30 | Investopedia
Read More
average apr for personal loan
The average APR for a personal loan will depend largely on your credit score and the lender you choose to work with.  A personal loan is…
best credit building apps
The best credit-building apps give borrowers the tools they need to improve their credit and spending habits. If you have bad credit, you may be…
best budget apps
The 10 best apps for budgeting include Mint, PocketGuard, and others. However, you may ask, “How can I find the best free budgeting app?” The…
credit score needed for a construction loan
While there is no one credit score that is required for construction loan approval, lenders typically tend to favor applicants with higher scores and a…

Quick And Easy Personal Loans Up To $2500*