Trying to rein in your budget for 2024? Check out these budgeting mistakes to avoid!
The following is a guest post by Jessi Fearon:
I seriously can’t believe that it’s already 2024. But here we are! Chances are you’ve probably created a whole bunch of goals for this year, and maybe you’re already chucking away at them. That’s fantastic!
But I also know, as I’m sure you do as well, that keeping the New Year Resolution energy going all throughout the year is very difficult. After all, we don’t know all that life is going to throw at us this year. We could be faced with unforeseen heartaches, immeasurable joy, or even a combination of the two.
And since many of us (me included) set financial goals for the New Year, I thought I’d share a few mistakes that I see all the time in my coaching clients and ones I’ve made many times before.
3 Budgeting Mistakes to Avoid:
If you want to stick to your financial goals this year, watch out for these budgeting mistakes as the year rolls on!
1. Not Tracking Daily Expenses.
Yes, I know this one is tedious and will not always be fun, but I cannot emphasize enough just how powerful tracking your daily expenses is!
This is a must if you want to rein in overspending! Nothing forces you to become more aware of your spending and where your money is going like having to track each one of your expenses. I have a budget planner from Erin Condren to track ours, but you could use anything — a sheet of paper, the notes app in your phone, or a spreadsheet.
I’m a huge fan of manually tracking (i.e., not relying on an app to do it for me) because, in our digitized world, we have become very disconnected from our money. Many of us don’t even write paper checks to pay our bills anymore — we do it all online! So there’s a bit of a disconnect between our bank accounts and our brains. The best way to fix that is to track our spending manually.
2. Underestimating Unexpected Expenses.
I get it — they’re unexpected! How could you possibly foresee an unexpected expense?! But are they really that unexpected? 🤔 Here’s the thing: if you drive a car, there will be maintenance expenses that you must pay throughout the year if you expect to keep that car running long-term. I mean, the oil isn’t going to change itself! (I drive a 23-year-old vehicle, so trust me, I know firsthand how important it is to keep up with regular maintenance to ensure the longevity of your vehicle.)
Same with Christmas — if you found yourself unprepared for Christmas just a month ago, guess what? It’s time to prepare NOW for Christmas so you don’t find yourself in that predicament again this year.
If you own a home, you should keep up with regular maintenance to ensure that you avoid any major expenses. After all, maintenance of our cars and homes (just like our bodies) prevents bigger emergencies from happening later.
The price of ownership.
Those expenses really shouldn’t be unexpected. They’re a part of ownership. It’s the same with kids and pets. If you have pets, you know they will need to go to the vet at least once a year to get their shots, and they’ll need flea and tick meds and food. With kids, you know that there’s bound to be a birthday party or two, and there’s more than likely going to be field trips, sports, piano lessons, or any other number of things that come up.
What’s the solution? Sinking Funds. You don’t need to set up a Sinking Fund for everything right now. But I suggest making a list of all the expenses that typically derail your plans (like car maintenance, kid-related stuff, Christmas, vacations, etc.) and then ordering them by priority. For instance, I would suggest prioritizing car or home maintenance over saving for a vacation.
Set a threshold amount — the minimum amount you want saved in that account. It can be whatever number you’d like, but I suggest at least $1,000 for home or car maintenance. Even if that doesn’t cover the total cost, it will help offset it. Then, once you’ve reached your threshold limit, stop contributing to that Sinking Fund and move on to the next one on your list.
3. Ignoring the Importance of an Emergency Fund.
Okay, I know that this is a strange one to put last, but this is the one that usually overwhelms folks the most. You NEED an Emergency Fund — non-negotiable. Seriously, it’s a need. Your Starter Emergency Fund should be at least one month’s worth of living expenses. Your Emergency Fund is your safety net for when life tips you upside down. Folks always ask me how to pay for car repairs that cost more than what’s in the car maintenance sinking fund. The answer is your Emergency Fund — that’s what it’s there for. It’s not there to pay for your oil changes. It’s there to pay for the transmission that suddenly went out.
Your Emergency Fund will keep you afloat when things get tough, so take it seriously and prioritize saving an Emergency Fund this year. (You can join our FREE $5k Savings Challenge here).
These are just the common budgeting mistakes that I see (and that I’m guilty of myself!), and I believe that if you work at just these three things this year, you’ll end 2024 in a financially better spot than where you began!
Jessi Fearon is the author of the Audible Bestseller in 2023, Getting Good with Money, and a Certified Financial Coach specializing in helping families learn how to manage their money well. She’s also a homeschool mom to three children and fur mom to two dogs and a feisty barn cat. Jessi and her family live in the North Metro Atlanta area.