The 10 most common budgeting mistakes
The 10 most common budgeting mistakes
Kasasa Blog

Find tips to improve your financial well-being

The 10 most common budgeting mistakes

Budgeting isn’t about depriving yourself of things you want. When done correctly, a budget serves as a blueprint for our financial future. In fact, a detailed, written budget is actually a vital part of a healthy financial plan.


Unfortunately, false perceptions about budgeting cause many well-intentioned people to make mistakes or give up on the idea of a spending plan altogether.

We're here to help put an end to budgeting blunders, once and for all.

10 common budgeting mistakes

1. Not having a budget at all


There is no way around it... making a budget sucks. It's scary. I mean, what if you don't like what you find? Besides, isn't there a saying "ignorance is bliss"?


You may want to avoid it but making a budget and some financial adjustments is much less painful than being in crippling debt. It hurts, but being broke hurts much more. Part of the problem is that budgeting has traditionally meant sacrificing things you love and embracing a pauper's lifestyle. Keep reading and we'll talk about some alternatives.


2. Forgetting about income tax


Pretend you have a salary of $50,000; That doesn't mean you take home a twelfth of that each month. Income taxes take a cut before you ever touch that money. If you calculate your max spending using your salary then you are pretending you have several thousand dollars that you... well... don't. In this instance, you would be over-estimating your take-home pay by around $12,000.


Below you will see the rate at which you were taxed in 2020.


Rate For Single Individuals For Married Individuals Filing Joint Returns For Heads of Households
10% Up to $9,875 Up to $19,750 Up to $14,100
12% $9,876 to $40,125 $19,751 to $80,250 $14,101 to $53,700
22% $40,126 to $85,525 $80,251 to $171,050 $53,701 to $85,500
24% $85,526 to $163,300 $171,051 to $326,600 $85,501 to $163,300
32% $163,301 to $207,350 $326,601 to $414,700 $163,301 to $207,350
35% $207,351 to $518,400 $414,701 to $622,050 $207,351 to $518,400
37% $518,401 or more $622,051 or more $518,401 or more

Source: Internal Revenue Service

3. Not having a category for emergencies


Emergencies and the resulting surprise expenses are an unavoidable part of life. The only way to prepare for the unknown is to acknowledge that things happen and to build up of a financial cushion. Consider the cost of the following emergencies:


  • Auto repairs. The most common auto repair is to replace the oxygen sensor. This typically costs $250.00

  • Home repairs. The most common home repair is a clogged or leaky sink and the average plumbing bill is between $160 and $430.

  • Health concerns. The typical cost for a medical visit for an illness ranges between $130 and $180.

Hopefully, you won't experience any of these scenarios soon, but it would be unrealistic to think that they will never come up. The general recommendation for an emergency fund is that it is large enough to cover three to six months of your total living expenses.


Coming up with that amount all at once is hard, so set up a monthly contribution. Any month you don't need to use it will be an addition to that fund.


4. Thinking you can live without fun


You can't.


Sure, you can save a ton of money if you only sit in a dark room and drink water. But how long can you keep that up? This budget will 100% fail. Besides, a budget is about taking control of your finances so you can spend your hard earned money on things that actually matter to you. It's about living the life you want to live. If you cut out fun then what's the point?


A general rule of thumb is to budget between 5% and 10% of your paycheck for fun. This might change depending on emergencies or big saving goals, but the important lesson is to make sure that you factor in some number here.


5. Failing to revisit your budget


As your financial situation changes, so should your budget. Did you get a raise? Change the budget. Did you spend a lot of money on gifts? Change the budget. Sign up for a cool new service that delivers a fancy cheese to your doorstep once a month? I mean, cool, but change the budget.


How often should you revisit your budget? Every month. When doing so, ask yourself the following questions:


  • Are all my expenses accounted for?

  • Are all my income streams reflected?

  • Am I overspending on anything I don't care about or don't need?

  • Am I tracking well towards my saving goals?

  • Am I paying down the right debt?


6. Overcomplicating your budget process


Don't reinvent the wheel! There are a ton of cool tools out there to make budgeting easier. If you're looking for a free budget template, check out these:


Budgets Are Sexy provides this free template. It is great for a bigger view of your finances (like your net worth and credit cards) but misses out some of the categorizing of your expenses. offers a very basic version. You'll probably need to add categories.

If you like counting every penny, then this template from Money Under 30 is for you.

There are plenty of other options out there, but a quick word of caution: Many budgeting apps will need to link to your bank account. Make sure you check the number of downloads, app reviews, and star rating before you give an app access to your bank accounts. The last thing you need is to grant a malicious service access to your finances.


7. Failing to negotiate


Before you cancel your cable service or skip out on a coffee, try negotiating down your bills or shopping around for better deal.


Are there any loans you can refinance? Banks and credit unions are always competing on rates and if you made a big purchase (like a car or a home) when your credit wasn't so good, then you should shop around for a new rate. 

Another other trick is to shop around for accounts that pay better rates. The average APY on a checking account is .04%. At those rates, a balance of $10,000 would earn a pathetic $4 a year. If you could find an account that offered APY of 1% (we know several), you would be earning $100 a year on that same balance. $96 more each year just for switching where you bank.

Have you ever signed up for a service at an introductory rate and then a year later the price jumps? Yeah, companies spend a lot of money trying to attract new customers and if you threaten to leave for another provider they will usually be willing to try and negotiate a deal or put you back into that introductory offer. You can do this yourself or you can sign up for an app to do it for you, like these ones do:

8. Focusing too heavily on saving


There are two sides to every budget; what you spend and what you earn. Which is easier; cutting another $100 from an already thin budget or figuring out how to earn an extra $100 a month?


More than a third of all Millennials have a side gig and entering into the gig economy can be a great way to solidify your financial standing without sacrificing your quality of life. To help out, we put together a list of our favorite side hustle ideas.


9. Making uninformed guesses


Imagine if you went to check your bank balance and the receipt said: "You have around $1,000." Around? Not cutting it. You want to know exactly how much money you have. Heck, if banks allowed more than 2 decimal places, that's what I would want to see.


When it comes to making our budget sometimes we let the rough guesses slide. "Electric bill is usually around this" or "I spend about that on food." These estimates can be wrong and the discrepancies can add up into being hundreds of dollars off from your expected expenses. The result: an avoidable budget crunch.


10. Forgetting about semi-regular expenses


How many subscription services charge you just once a year? (Hello, Amazon Prime)

When constructing your budget it is easy to remember all of the services you are billed for on a monthly basis, but it's much harder to recall those less frequent charges. They add up. Some services to consider when budgeting are:


  • Website hosting

  • Streaming services

  • Online classes or tuition

  • Insurance payments

  • Retirement contributions

  • Charitable giving

  • Quarterly taxes

  • Union dues or organization membership fees

  • Holidays and gifts

Take those bills and divide them by 12, then commit to saving a portion of that expense every month. For example, I have $100 subscription billed monthly, so I put away $8.33 every month in preparation for that larger bill.


Do you have a budgeting tip? Let us know on Facebook!

Tags: Budgeting, Banking

About Kasasa

We believe your money should do more... for you and your community. Founded in 2003, Kasasa is a financial and technology services company working to help empower consumers to take control of their finances and be proud of their money by banking locally with community banks and credit unions in your neighborhood, that you know and trust.

These local institutions have roots in their communities, care about people over profits, and are actively invested in local businesses to help keep the economy strong (unlike some of the megabanks we could name).

We believe you shouldn't have to choose between the best banking products, the best customer experience, or keeping your money local, where it can do more good. We've created ethical banking products and partnered exclusively with community banks and credit unions. So you can have it all.

Kasasa accounts are available at community financial institutions around the country. Find one near you to get free checking that pays cash rewards each month you qualify, the only loan with Take-Backs™, and more.