Budgeting is one of the most basic and crucial aspects of managing personal finances, enabling people to control spending, set money aside for certain purposes, and refrain from borrowing. According to Scott Tominaga, despite that many individuals make some common mistakes that impede their budgeting efforts. Here are five commonly made budgeting errors and helpful strategies on how to overcome them.

1. Failing to Set Clear Goals

In budgeting, one of the major mistakes is not having clear financial goals. The absence of defined set goals leads to a loss of focus and derailment of reaching objectives. 

Solution: Start by determining both short-term and long-term financial objectives. Short-term goals may include, planning to create an emergency fund, and clearing off credit card debts, while long-term goals might include saving for retirement, buying a house, etc. Write down the objective and display it making it visible, reminding people what they are working toward reaching them. This clarity is important to prioritize one’s overspending habit while considering savings.

2. Underestimating Expenses

A large number of people undervalue their monthly expenses, which can result in shortfalls of budget eventually causing frustration and disappointment. This mistake often occurs when individuals fail to account for fixed and variable expenses and overspend towards discretionary spending, like dining out, organizing a birthday party, etc.

Solution: To formulate a more accurate budget, make sure to track all spending once monthly without failing. Use spreadsheets or apps to classify all spending into fixed costs (like rent or insurance premiums) and variable costs (like groceries, utility bills, and entertainment). Never forget to calculate irregular or occasional spending, such as car repair, annual subscriptions, etc.  Paying attention to all spending, helps individuals create a more accurate and realistic budget.

3. Overlooking Irregular Income

Freelancers, contractors, and seasonal workers typically face the difficulty of setting their budget due to irregularity in income. Consequently, many ignore strategizing budgets and eventually end up with cash flow problems.

Solution: 

According to Scott Tominaga, to avoid this issue, irregular earners need to calculate the average income earned by them for a couple of months. This will enable them to conclude with a budget, based on which they can spend money while prioritizing savings. During months when earnings are higher than average, they should make sure to save the surplus rather than overspending. The buffer can be helpful to meet expenses during low-income months, thereby providing financial stability. 

4. Not Tracking Spending

Budget setting is only half of the journey. Failing to monitor and review where the money is spent can lead to discrepancies which can be destructive to one’s financial objectives. Because overlooking expenses without monitoring may lead to overspending. 

Solution: use a spreadsheet or any budgeting app to monitor expenses consistently.  Also, develop a habit of evaluating expenses against the budget that not only helps pinpoint the areas where they could be overspending thereby minimizing them. Individuals should realign their budget with increased income, and changes in expenditure that help get a clear picture of their financial standing. 

5. Being Too Rigid

While it’s important to stick to one’s budget, being overly rigid can lead to frustration and burnout. Life is unpredictable, and unexpected expenses can arise, making a strict budget difficult to maintain.

Solution: Individuals should have flexibility in their budget. The objective of budgeting is developing a disciplined spending habit, however, it doesn’t restrict one to forgoing every desire or want like dining out or going on a weekend trip. But it suggests to avoid overspending. This kind of flexibility is essential to enjoy freedom, and fun with family while still sticking to one’s overall financial plan. 

Avoiding the common pitfalls of budgeting can add value to one’s financial life. Having a proactive approach and diligence can help individuals achieve their financial goals while having control over their finances.