Taking control of your spending takes time and patience. Like Rome, good financial habits aren’t built in a day.

If you’re ready to commit to a budget and make some financial improvements in 2023, you’re off to a great start. But once a budget is established, there are certain common mistakes that can derail you — even slightly — and keep you from reaching your financial goals. 

Here are a few to watch out for and the best ways to prevent them from derailing your financial goals.

Budgeting Mistake #1: Not Saving for Emergencies

Over half of Americans don’t have enough savings to cover a $1,000 emergency expense[1]. With concerns of a recession, it’s especially important to have something tucked away, just in case.

The general rule of thumb for emergency funds is 3-6 months’ living expenses. If that sounds daunting, it’s okay to set your sights a little lower. Try starting with a smaller goal, like $500 or even just $20 a month, if you can. Once you’re in the habit of saving, you can always aim higher.

Add “emergency savings” as a line item to your budget and find ways to cut down on other costs to save that extra monthly amount. One way to automate your savings is to create a separate account and set up recurring deposits. Or, instead of cutting expenses, find ways to supplement your savings with extra income or bonuses, or by putting them in a high-yield savings account.

Budgeting Mistake #2: Overestimating How Much You Have Left to Spend

This is easy to do, particularly if you aren’t tracking your spending or have a lot of bills coming in at once. Overestimating your spending money is also a common mistake if your budget is based on your income before taxes, or a higher estimate of your income if you’re self-employed.

In the short term, you may find yourself short of funds, so do what you can to make sure all your bills are covered before trying to fix the problem. That could mean tightening your budget for the rest of the month.

Moving forward, consider resetting your budget based on a lower-than-average income month and track your spending. This will offer a clearer picture of where your money is going and identify potential areas of overspending. 

You can also check which budgeting tools are available with your PNC checking account. For example, Low Cash Mode®[2] can help Virtual Wallet customers avoid overdraft fees and manage spending decisions when their account balance is low. You can also take advantage of other Virtual Wallet tools, like Money Bar®, which provides real-time views and management of scheduled bills, savings and the money left for the things you want.

Budgeting Mistake #3: Leaving Out Money for Fun

Almost two-thirds (64%) of U.S. adults live paycheck to paycheck[3]. So why build fun money into your budget if you’re already struggling to pay the bills? It might seem extravagant, but this budget line item is actually an important part of building good financial habits.

Fun money includes any expense that’s more of a “want” than a “need,” like eating out, entertainment, or travel. Budgeting for it also:

  • Encourages you to give every dollar a job and track spending 
  • Prevents guilty overspending by providing an “outlet” and the freedom to live a full life 
  • Can act as a reward for keeping more long-term financial goals on track  

If your current budget doesn’t have a lot of wiggle room, consider switching to a budgeting strategy that has fun money built in, like the zero-based budget or 50/30/20 rule. Zero-based budgets allocate every penny of income to specific line items, including entertainment. The 50/30/20 rule divides your expenses into 50% needs, 30% wants, and 20% savings so you always have something to spend on yourself.

Budgeting Mistake #4: Forgetting to Adjust Your Budget Over Time

Spending needs change over time for different reasons. These could include having a baby or growing your family, buying a new house, or paying off debt. Other reasons may include rising healthcare costs or inflation. 

No matter where you – or the economy – are in life right now, flexibility is key and maintaining a rigid budget just for the sake of it can be more harmful than helpful. If you find yourself overspending regularly, for example, the problem might not be you; it might just mean that your budget no longer fits your needs. After all, babies come with a lot of additional expenses and higher inflation means spending more on groceries and gas. And of course, spending can go down as well – maybe you’ve recently paid off debt, received an inheritance or moved to a lower-cost area. 

Whatever the case may be, take a moment to map out your current financial needs and actual expenditure. Then, compare them to your budget. Do you notice any differences? If so, how can you readjust your budget to better fit your finances? If you want to be a savvy spender, try checking in with your budget a couple of times a year to make sure it still works for you.