Common Budget Mistakes When Trying To Save To Buy A New Home

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.

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 overestimating your take-home pay by around $12,000.

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 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 for 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.

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.

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 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?

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:

We are including our 12-month editable budgeting tool for everyone in Buyers Boot Camp

Failing to Negotiate

Before you cancel your cable service or skip out on a coffee, try negotiating down your bills or shopping around for a better deal. Are there any loans you can refinance? Banks and credit unions are always competing on rates and if you make a big purchase (like a car or a home) when your credit isn’t so good, then you should shop around for a new rate.

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.

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 to hundreds of dollars off your expected expenses. The result: an avoidable budget crunch.

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, Birthdays, Graduations Etc.

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