Three common budgeting mistakes

Written by Ronald Pratap

on December 7, 2021

Over the years, I’ve had the privilege of assisting hundreds of people on their financial journeys, and as a result, their financial lives have been transformed.

I get to observe the most typical blunders people make, as well as what works to help them turn things around.

Changing our clients’ perceptions of ‘budgeting’ is one of the keys to achieving significant change.

Here are three frequent budgeting mistakes that I see people make:

1. Attempting to plan for the future while ignoring the past.

Does this ring a bell? You had a “I’m changing my life” moment one day and you’re sick of feeling financially pressured, so you resolve to “get your finances in order.” As a result, you build a list of categories: food, clothing, entertainment, and so on.

Then you begin assigning each group a random number. “Okay, this month, I’m not going to spend more than $100 on clothes,” you tell yourself. Your budget.

If that seems familiar, I have some terrible news for you: that’s a wishlist, not a budget. You’ve concocted a budget out of thin air that works… on paper.

However, it never appears to ‘work’ in real life… which is because it isn’t based on reality.

Looking at your past, rather than your future, is the first step in developing a budget. What have you done with your money? What happens to your money?

Because it is based on real-life facts, the budget you establish for the future will be lot more realistic when you first look at how you’ve been spending money up to this point.

For many of the clients, this one modification in the budgeting process has been a game-changer, allowing them to construct realistic spending plans that really fit their lifestyle.

2. Expecting your budget to perform all of the work.

Assume you’re planning a road trip and have sketched out the routes you’ll need to get there. So, what’s next? Do you find yourself peering intently at the map, expecting the road trip to appear out of nowhere?

Isn’t that correct? The map is merely a guide to keep you on track. It’s merely a tool. You must plan the road trip on your own. You must obtain a vehicle, load it with gasoline, and drive it. The map isn’t going to help you with that. YOU are the one who brings the road trip to life.

Many individuals believe that simply having a budget will change the game. A budget, like a map, is merely a tool to keep you on course. It can tell you whether you’ve strayed too far from your budget or which areas need further scrutiny.

But, in the end, your budget represents your decisions, your lifestyle, and the money management mechanisms you have in place. It can only reflect those things, not change them.

This is why budgeting is only a small portion of what we teach our clients because a budget won’t assist much if your money systems, mindset, and behaviors aren’t aligned with financial success.

3. Forcing yourself to do things you despise because you believe it is the only option.

One of the main reasons that budgeting doesn’t work for many individuals is that they’re attempting to ‘push’ something that doesn’t fit their personal tastes.

People place a lot of pressure on ‘budgeting,’ as if it’s the ONE thing that will suddenly improve their financial situation. And if they don’t get it right, they consider this as a failure, which they haven’t.

It’s similar to working out. You keep forcing yourself to exercise until you realize that the best, most long-lasting sort of exercise is one that you enjoy.

It’s the same with money management. There are a variety of approaches, and what works best for you will be determined by your unique preferences and lifestyle.

Some of our clients prefer budgeting tools, while others prefer spreadsheets, while others prefer pen and paper, and yet others prefer to automate everything and keep the manual work to a minimum.

Budgeting is a tool for achieving a goal. Allow yourself to be flexible in the means (tools and techniques) to get there by focusing on your financial goals.

If you would like to review or make changes to your finances, why not call us to discuss and see how we can assist.

We service the Macarthur area with an Office in Oran Park and Sydney City. We also provide services in the surrounding suburbs such as Liverpool, Parramatta, Penrith, Fairfield city, Norwest region and the Blue Mountains.






The information in this website and the links has been prepared for general information purposes only and does not take into account your personal objectives, financial situation or needs. It is not intended to provide commercial, financial, investment, accounting, tax or legal advice. You should, before you make any decision regarding any information, strategies, or products mentioned on this website, consult a professional financial advisor or Accountant to consider whether it is suitable and appropriate for you and your personal needs and circumstances.

Ronald Pratap

Principal Financial Planner at RP Wealth Management | Financial Planning l SMSF I Insurance l Property Advisory. Our purpose is to provide our clients with sound advice and direction to assist with their financial affairs and help them make the best choices in achieving what is important to them.

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