Don't Hurt Your Finance By Budgeting Blunders

They say that what someone doesn't know won’t hurt them. Unfortunately, when it comes to money, this sentiment doesn't apply.

Emotional spending is common and can cause a big problem if you do it consistently. Too much emotional spending — and even one trip that results in particularly expensive purchases — can consistently derail a budget. It’s easy to rationalize spending when you are emotional, because sometimes spending in general, or indulging in a particular purchase, momentarily makes us feel better. However, when we make financial decisions based primarily on our emotions rather than our needs or budget, we later experience buyer’s remorse.

Everyone knows that a budget is the linchpin holding together your financial empire. If you don't have a budget, whether or not you know it yet, you have money problems. But to avoid money woes, it isn't enough to create a budget. You have to design one that works properly. That’s why you'd do well to steer clear of these five mistakes consumers often make when budgeting.

Creating the budget – then not tracking the budget. It's easy to say you're going to spend a certain amount on your mortgage, your cable bill and other fixed expenses. But as everyone knows, variable expenses like groceries and gas can really throw things off.

Tracking your cash isn't always easy to do. With so many supercenters like Walmart some people get a distorted view of what they are spending on groceries because when they go to the supercenter, they're purchasing a variety of items beyond groceries.

Only budgeting monthly. While most of your bills and expenses occur on a monthly schedule, there are some that might not fall neatly into that cycle. Leonard Wright, a San Diego-based member of the National CPA Financial Literacy Commission, points out that most people have quarterly, semiannual or annual expenses.

Not setting a realistic budget. If you're cash poor, it can seem irresponsible to budget for entertainment. So you don't. You plan for your mortgage or rent, your food, your utilities, gas and other essentials, and that's it. You will not budge from your budget.

So even if you don't plan on eating out or catching a movie, budget for the possibility. The worst that happens is you have money left over at the end of the month. If you don't budget for some extras, you'll probably end up doing something extra anyway, and that's where the trouble comes in.

Trouble also occurs when you’re not honest with yourself about how much you make – or don't make. This should go without saying, but some people develop their budget based on their gross and not their net. Working from gross is OK if you accurately reflect your tax liability. It is important to budget based on your take-home pay.

Not planning for emergencies. Even if you account for everything going on in your life, you need to plan for what hasn't happened. Someday, you will need a plumber. Or your home will be infested with termites. Or your car will need new brakes. Emergencies crop up, especially when you're living an active life.

If you're already living paycheck to paycheck, it may be impossible to put money aside every month for the possible flat tire or sudden operation. In fact, that may be what you use your credit card for. But if you have the money to put cash aside for life's bumps and bruises, that's an instant upgrade to your budget.

Not considering the true cost of a financial decision. Maybe you bought a house and knew you could handle the mortgage payments, but you didn't think about maintenance costs or the furniture you needed to purchase.

There are plenty of one-off purchases, like books and furniture, where you'll pay money once and never again, but a lot of items require maintenance or ongoing costs. Think printer ink, pet food, a smartphone.

If you live your life without consulting your budget, you really don't have a budget. You only have money problems, whether you know it yet or not.