Budgeting Mistakes That Keep You From Saving

No one’s budget is perfect, nor will anyone’s budget ever be perfect. That’s the beauty of life is what works for one person may not work for another. That said, in finance, we can see patterns that suggest what budgets will help people save for vacations, retirement, or family illnesses, and what budgets will be broken before they even begin.

Budgeting is difficult to fully encompass due to everyone’s unique situation; however, below are what I believe to be the 5 common budgeting mistakes that hurt people from saving (in no particular order).

Mistake #1: Treating Savings as “Whatever Is Left Over”

In most people’s budget this is what happens. To be honest, it doesn’t surprise me either. With the cost of living increasing constantly, it’s hard enough to get to the end of the month, let alone if your budget was $100-$200 lower due to saving. 

The reality, though, is that you should prioritize saving–whether for retirement, a house, a car, etc–so that those expenses don’t add another debt (or increased future discomfort). That truly is the difficult part, living in discomfort now so that the future you has a chance to live comfortably later. 

I’m not saying eat Ramen noodles or rice for every meal; however, if you have flexibility in your budget, automate a transfer to savings, an HSA, or to your IRA (make sure you also invest that money, otherwise it will sit as cash and provide no additional benefit). $50 a month can make a big difference if you start young. The additional savings required only get more and more unrealistic as you grow older. The bottom line: start setting money aside while you’re young and make it one of your key budget non-negotiables.

Mistake #2: Not Accounting for Irregular Expenses

Irregular expenses mess up a lot of budgets–and rightly so. They happen very infrequently and, quite frankly, probably get forgotten about. You may be asking, “What’s the solution?” 

This requires a little more effort to make an annual budget rather than just looking month-to-month. Go through expenses that happen infrequently–property tax payment, car repairs, house repairs, appliance updates, etc–and start setting aside a reasonable amount each month to help fund those. That’s not to say that you’ll always be fully funded before your car breaks down again; however, you’ll have a considerable amount more saved to put toward that expense than you otherwise would have. 

Mistake #3: Budgeting With Unrealistic Numbers

A budget shouldn’t be aspirational. It should be operational. There can be goals like, instead of spending $800 on groceries this month, let’s spend $750. But if your goal is to spend only $400, let’s be honest with each other, that isn’t happening, especially if you almost always spend around $800 each month. 

If you’re dead set that your monthly food budget (or whatever item you have wishful thoughts on) should be $400, then take it in baby steps. Start with $750 for a few months, then decrease to $700 and so on until you reach either a) your goal or b) the lowest amount you can feasibly pay without driving yourself crazy. A budget should be a goal, but it must be a reasonable goal. Setting a budget with unrealistic numbers will create more mental hardship than financial liberty. 

Mistake #4: Ignoring Small Recurring Charges

Subscriptions. Apps. Memberships. Streaming services. Coffee. Delivery. All are individually small, but collectively they are meaningful.

$12 here. $18 there. The $29 monthly subscription you forgot about. So small that many people say they won’t make a difference, but that mentality is dangerous because it leads to spending more than you realize. I’m not saying give all these up, I’m saying determine for yourself whether you are getting a good return on value or if you are getting nothing out of it and still paying. 

For example, if you have a gym membership and haven’t gone in for 4 months. Why have a gym membership? “I’ll go when I have more time.” You haven’t gone that past 4 months, have you? What’s to say that will change in the near future? You’d be better off walking or running through the neighborhood, or if you’re a lifter, buy some dumbbells, and when aspiration hits for the one day a quarter you want to lift, you can lift at home. 

Another example, if coffee shop coffee is your desire, maybe make it a treat for yourself. Brew yourself coffee at home most days of the week, and once or twice a week, treat yourself to a coffee shop coffee. This saves almost $2,000–not a lot on its own–but if you add up all the other “it’s cheap so I’ll do it” purchases, it could be considerable savings over the course of a year.

Mistake #5: Setting Goals That Are Too Vague

Respectfully, “I want to save more” isn’t a goal. It lacks an actionable motivation. Specificity creates action. Without a defined target, savings can get deprioritized. Instead of “save more,” pair it with a “why”. Why do you want to save more? For vacation? For retirement? For financial freedom? Clarifying your “why” increases the follow-through success.

Bonus: Mistake #6: Not Adjusting the Budget as Income Changes

Raises, bonuses, side income — they often disappear into lifestyle creep. If your income increases but your savings doesn’t, your budget isn’t doing its job.

Similar to mistake #1 on this list, the solution is to allocate a portion to savings immediately, increase retirement contributions, or accelerate debt payoff.

Lifestyle creep should be intentional — not automatic.

To Summarize

Saving isn’t an outcome. It’s a system.

When your budget:

• Plans for the predictable
• Automates savings
• Allows for enjoyment
• Adjusts as life changes

Saving stops feeling hard.

If you’re building a budget and not seeing progress, it may not be your income — it may be one of these small structural mistakes.

Fix the structure, and the savings usually follow.

As allows, to get better answers on your financial situation, contact me to learn more.

— Brendan Tiedeman, CPA, CVA