Unveiling the 6 Invisible Ways You Cheat on Your Budget (And How to Avoid Them)

You have likely encountered situations when your budget doesn’t seem to work, no matter how hard you try. It might be that you are not the problem; rather, it is how you approach creating and adhering to a spending plan. There are several ways people cheat on their budgets without even realizing they are doing so. Here, we explore six common behaviors that undermine your financial goals and provide actionable tips to avoid them.

Overstating Your Income

When drafting a budget, it is crucial to include all your income sources – but only if the income is regular or consistent. Some people commit the mistake of including overtime income in their budgets. However, since overtime income can fluctuate from paycheck to paycheck, adding this to your budget can create a false sense of financial security. If you base your budget on money you do not have, you may end up overspending throughout the month and be forced to use credit cards.

Denial About How Much You Actually Spend

Another significant issue with budgeting is underestimating or guesstimating monthly expenses. This practice doesn’t help you understand your real financial situation. As Michelle Schroeder-Gardner, the author of Making Sense of Cents, suggests: “A budget should always include actual numbers, such as the actual income received that month and actual expenses.”

To get a clearer picture of your spending habits, review bank statements or track your expenses for an entire month. This will provide a realistic understanding of your expenses and ensure you allocate appropriate funds to each category in your budget.

Failure to Regularly Review Your Budget

A budget isn’t a “set it and forget it” tool. In the beginning, it won’t be perfect; you need to make adjustments until you get it right. Also, unexpected expenses may cause you to overspend in some categories, so continuously monitor your budget to keep it on track. If you spend money outside your planned budget, be prepared to reduce spending in other areas or use less cash to avoid going overboard.

Keeping Your Money Too Accessible

If you are working on a budget but still carry extra cash and credit cards with you, you make it too easy to cheat on your spending plan. To combat this, only take the cash you need for the day and leave your credit cards at home. While giving yourself some ‘splurge money’ in your budget may seem counterintuitive if you are trying to save, not allowing yourself any discretionary spending can ultimately lead to budget failure.

Forgetting to Budget for Splurges

Although it is important to remain realistic about your budget and allocate funds for necessary expenses, depriving yourself of some fun is not the solution either. Budgeting is an essential part of staying on track with your finances. If you don’t give yourself the freedom to spend some money on fun stuff or hobbies, you are likely going to end up feeling deprived and neglect your budget.

Stealing Money From Other Spending Categories

When your budget starts feeling tight in certain areas, it can be tempting to move funds from essential categories to cater to your current whims. For example, if you have already exceeded your entertainment budget for the month, don’t resort to stealing $100 from your housing budget to continue having a good time with friends. This kind of behavior can put you in the red and undermine the whole purpose of budgeting in the first place.

To successfully stick to your budget, it is essential to recognize and address these six sneaky ways you may be cheating on your spending plan. Honesty with yourself, realistic allocation of funds, regular review of your budget, and mindful spending habits can help you make the most of your financial resources.