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Ask the Expert: What Are the Most Common Budget Mistakes?

posted: 06/08/16
by: Ashley Lauretta
Secure Money
iStock

When you hear the word budget, it's almost always a buzzkill. Keeping a budget goes along with the idea of tightening your belt, cutting back on the things you love, and logging every receipt in an Excel spreadsheet.

With that view of budgets, it's no wonder so many people are making mistakes when creating one of their own, or, worse, not making a budget at all.

"Budgets are simply a way to tell your money where to go, so it's working for you and not against you," shares Patrice Washington, a personal finance coach, Money Maven on the Steve Harvey Morning Show and founder of Real Money Answers.

1. Budget mistake: Thinking budgets are just the worst

"The biggest mistake people make is thinking that budgets are somehow evil and only used to rip them of every fun activity they've ever known." Especially when it comes to spending, our attitude toward something defines our success at it, so Washington stresses that having a change of heart--if you hate budgets--is the first place to start.

2. Budget mistake: Not defining a clear goal

Once you've cleared that hurdle, it is time to define a clear goal when it comes to your money. That goal not only involves setting a number but also a time period.

"We have to remember that budgets are so fundamentally important to our overall financial life because they do more than help you prevent senseless overdraft fees," adds Washington. "Your budget sets the tone for the rest of your financial plan. How much you can save, give, spend, invest, and pay down debt all hinges on your ability to budget effectively."

Setting a clear--and simple--goal, and then once that is met, setting another clear and simple goal, is the key to success. Washington explains that without goals, it is easy to lose focus and months can slide before you even circle back to your budget.

3. Budget mistake: Making it too complicated

The stress to keep it simple is also important, because the harder something is, the more you won't want to do it.

"You have to think about where you are in life and stick with what speaks to you. If you're relatively young, have no children, and have minimal assets and debts, don't overwhelm yourself with a budget your parents would use," advises Washington. " They may have tons of different income sources, assets, and investments that don't apply to you right now. You don't want to have line items there just to take up space on the paper or in your head."

Once you reframe how you think about budgeting and are able to set--and reach--your first goal, the process becomes easier and enjoyable as you begin to see the benefits and reap the rewards of your saving.