Building a Budget? Watch Out for These 6 Common Mistakes

A couple building a budget together

Every dream begins with a plan.

Crafting and following a budget is one of the best ways to ensure you’re making ends meet and making progress toward your goals, whether that means paying off student loans or saving for your first home.

If you’re thinking about making a budget, go for it! Just be sure to avoid some common budgeting mistakes that can end up derailing your best intentions. They’re easy to make, but they’re also easy to avoid if you know what to look out for.

1. Underestimating Your Monthly Expenses
This is a big one. If you’re not being realistic about what you’re spending on recurring needs like groceries, clothing, and transportation, you won’t have enough to allocate to long-term goals like a house, car, or vacation. You might also get frustrated and want to toss the whole budgeting thing out the window.

First step: be honest with yourself. Look at your actual expenses over the course of a month, and use those numbers as your baseline. As you move forward, you’ll be able to identify categories where you can cut back.

2. Budgeting Based on Your Pretax Income
Most people think of their income in terms of their pretax salary or wages, not their actual take-home pay. Say you’re a single Californian with a salary of $60,000 a year. After federal and state income and payroll taxes are withheld, your take-home pay could be something more like $44,000. Plus, many people have additional payroll deductions, like medical insurance, life insurance, 401(k), and FSA/HSA plans. Make sure you’re looking at what’s actually hitting your checking account each pay period before you build your budget.

3. Not Budgeting for Emergencies
Things happen. Cars break down, roofs leak, iPhones get lost at sea, and you can’t account for every possibility. What you can do is start setting aside money in your budget for emergency fund, so these unplanned expenses don’t cut into your savings goals or put you into debt. Most financial experts say that an emergency fund should total between three and six months of basic living expenses—but it’s important to start somewhere.

If you’re daunted by the prospect of setting aside a big chunk of your very next paycheck, try a ramp-up plan like our 52-week savings challenge. You’ll start by saving just $1 your first week, but by the end of the year, you’ll have almost $1,400.

4. Not Tracking Your Expenses
It’s one thing to create a budget, and it’s another thing to make your budget work. If you’re not keeping a good record of all your expenses from month to month, you’re likely to overspend and fail to meet your goals. There are lots of different systems to help you manage money and track your day-to-day expenses. The key is to find one that works well for your particular lifestyle.

If you’re wondering how to budget, we’ll make it easy for you. With Digital Banking at USECU, you can use your laptop, tablet, smartphone, or smartwatch to access free money management tools that let you create a personalized budget, categorize expenses, see all your accounts in one place, and track your spending in real time.

5. Not Budgeting for Fun
This may not have the same financial consequences as failing to plan for the un-fun expenses in life, like home repairs and medical bills. But it can definitely sabotage your budgeting process.

Lots of people think that the key to saving money is to deprive themselves of all entertainment and leisure activities, but this simply isn’t a workable approach. It’s not sustainable, and it’s likely to make you resent your budget, rather than seeing it as a vehicle for a fulfilled, happy life. A good rule of thumb is to allocate about 10% of your take-home pay to fun stuff—brunches out with friends, concerts, windsurfing, or whatever floats your boat.

6. Not Coordinating With Your Significant Other
Money is one of the top sources of conflict between couples—but it doesn’t have to be that way. It can be great to have a teammate in the pursuit of big dreams. When it comes to budgeting household income, it’s important that partners set goals together, and then maintain an open and honest dialogue, even if they choose not to hold joint accounts.

One of the biggest budget-busters is when each partner spends down a particular category without communicating. Holding regular “money meetings” and/or regularly discussing planned expenses or individual financial responsibilities can help keep everyone on the same page.

Let’s Make This Happen!

At USECU, we’re here to help you build a better future—and that includes giving you all the tools you need to make budgeting easy. By setting up automatic transfers into your Savings Account, you can save money every month without even having to think about it, and with our enhanced Online and Mobile Banking experience, you can spend smarter and track the health of your budget instantly from the devices you like best.


Must meet membership and account criteria. Mobile and data rates apply when using Online Banking. This information is provided for educational purposes only and is not intended to be financial advice.

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