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What NOT to do when creating a budget

The concept of budgeting is something many of us hear about constantly, however, it can be tricky to create a budget that actually works for your household, let alone one that you are able to stick to.

Budgeting is essentially the process of tracking and being mindful of your spending, savings, and goals all in relation to one another. The first few steps often involve a sequence of writing down your bills, recurring expenses (groceries, gas, etc.), and your income—then calculating a balance from there.

Once this information is determined, you can go about deciding what steps need to be made to best serve both your short- and long-term goals. These steps may seem simple enough, yet there is plenty that could go awry in preparing your budget.

Here is what NOT to do:

Create unrealistic goals or expectations.

Many create a budget after coming to a realization that their spending habits need to change in some shape or form. Given this, it becomes all too tempting to make drastic changes that are often far too conservative to be realistically possible to implement.

To create a budget that you’ll be able to stick to, prioritize making changes where necessary while also allowing yourself some wiggle room. If you love your newspaper subscriptions or going out to eat a few times a month, don’t cut that out completely—rather work a modified version of these items into your budget.

Another item to be mindful of when preparing your goals is paying off high-interest debt. If you owe a large amount on a credit card, high-interest student loan, etc., prioritize paying that down before fully committing to pursuing other goals.

Only account for monthly expenses.

If you pay for car insurance only once a year or will be making a large purchase in upcoming months, such as a down payment on a new car or taking a vacation, factor those costs into your budget’s monthly expenses as well.

Neglecting to factor in larger purchases, even if they are one-time or rare transactions, could derail your entire budget.

An easy fix is to take the amount of those items (or estimate the amount as close as you can if the exact amount is unknown) and divide by 12 to factor it into your monthly budget to more accurately account for them.

Ignore your savings.

Included in your monthly budget should be how much you would like to contribute monthly to your savings accounts as well as to your retirement savings accounts.

Review how much you contributed to accounts of this nature within the past year and determine if your contributions for this year should be altered in any way.

For your savings account, you should have at least enough saved to cover unexpected expenses or a sudden loss of income—a general guideline is three to six months of savings to cover your day to day expenses.

For retirement funding purposes, if you contribute to a 401(k) account through your employer, try to take advantage of the full match your employer offers. Keep in mind the 2022 limits for retirement account contributions—$20,500 for those under the age of 50 and a catch-up amount of $6,500 for those over 50.

Set it aside.

For a budget to work, it must be reviewed and evaluated on a regular basis. Creating a comprehensive budget won’t do you or your household any good if it remains hidden in your computer files or buried at the bottom of a desk.

Store your budget in a place you will remember and make a point to sit down and review your progress once a month, or however often you are comfortable with. Even if you think you are staying on track and within the means of the budget, there could be room for improvement that could only be identified by reviewing regularly.

If you need a second opinion on what is and isn’t working, consider talking with an experienced financial professional on what you could improve on.

Quit too early or be unwilling to adjust.

As you move forward, there will be bumps in the road and likely several setbacks.

If an unexpected expense comes your way, such as a car repair, hospital bill, etc., don’t take that as an excuse to throw away your plan. Rework your budget if a large expense completely throws you off course.

If you find you are having trouble spending what you budgeted for week after week, consider using cash only to implement spending discipline. Your budget is not set in stone—adjust as you see fit along the way and find what works for you.


However, you choose to create and embark on your budget, remember that each household has different needs and methods that work for them. If you are unsure of where to start or need a second opinion, reach out to your financial advisor for their take on it.

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Retirement topics – contributions. Internal Revenue Service. (n.d.). Retrieved October 19, 2022, from,is%20age%2050%20or%20older.\

Cola increases for dollar limitations on benefits and contributions. Internal Revenue Service. (n.d.). Retrieved October 19, 2022, from