Common Budgeting Mistakes Middle-Class Families Make And How To Avoid Them

Being from a middle-class family, it can be tough for us to grow our wealth. We are stuck in the same financial bracket. But why does this happen?

To grow your money, you have to follow your budgeting plan. Your plan must not contain common mistakes, so you can easily grow your money.

In this blog, you will understand the common budgeting mistakes you make and how you can avoid them.

1. Not Tracking Where The Money Goes

Most middle-class families believe that their expenses are under control. And suddenly, they run out of money by the 20^th of every month.

Most of us just track expenses in our minds and do not prepare a monthly budget at all. I have often wondered where my money went.

Suppose your family made the following unplanned expenses:

Now that is ₹9,500 gone without notice. 

How to avoid:

Simply, use a notebook or a mobile app. Track every rupee you spend. After 3 months, you will notice patterns. You might find yourself spending over ₹10,000 on avoidable categories.

2. Confusing Wants With Needs

Every want is not needed. Learn to differentiate between your wants and needs. Many middle-class families mistake lifestyle upgrades for essentials.

Dining out twice a week, new gadgets every few months, or OTT subscriptions on all platforms, do you really think you need all this?

Let’s look at your monthly ‘entertainment’ spending:

How to avoid:

You can easily save this ₹7,000 by cutting back on your unnecessary wants. Use a wishlist system. And wait 30 days before buying anything impulsive.

3. No Fixed Savings Plan

As our income arrives, most middle-class families think that first we will cut all the expenses from it and then we will save or invest the remaining amount.

Do you also think so? Then you are making a big mistake.

You need to fix an amount from your income to save any cost and then you should manage all your expenses from the remaining amount.

This way you will be able to save more and cut down on non-essential spending.

Suppose Rakesh’s family’s total income is ₹1,00,000. Their monthly expenses are around ₹91,000. And their savings are approximately ₹9,000.

If they had saved 20% of the income first, they would have saved a fixed amount of ₹20,000 each month. And would have managed their expenses with ₹80,000

How to avoid:

To save more you should use the 50-30-20 rule as a guide:

Invest in SIPs, PPF, or any other automated saving method. This will make it non-negotiable.

4. Living On EMIs

Having an iPhone, bike, or going on vacations sounds cool. But not that cool if it is drawing you in EMIs. 

You might be able to manage individual EMIs for all this but together they eat a big amount of your income.

Naveen took a few loans thinking that their EMIs are small and I will manage them easily. But let’s see how they have become difficult for him to manage now:

How to avoid:

You need to make sure that your EMIs are not exceeding 30% of your income. If they do then you need to stop taking new loans. Also, try to repay your old one quickly.

5. Forgetting Emergency Fund

Emergencies always arrive unannounced. And if you are not prepared for it in advance then it might cost you a lot.

Most middle-class families do not pay much attention to creating emergency funds. When emergencies such as medical emergencies, job loss, or urgent repairs take place they are forced to borrow at high interest.

Suppose you have no insurance or savings. A sudden medical bill of ₹25,000 can lead to credit card debt at 36% per year.

How to avoid:

To avoid such a situation you need to build an emergency fund of 3 to 6 months expenses. Even if you will save ₹2,000 monthly then you will be able to save ₹24,000 in a year.

Summary: Budget Issue Vs Smart Fix

Final Thoughts

Most middle-class families often struggle with money-related issues. It is not because they don’t earn enough, it is because they don't manage it wisely.

They make budgeting mistakes that seem too little at first but become huge over time. You don’t need to make any huge transformation all of a sudden. 

Just start with taking baby steps such as saving first, cutting non-essential expenses, and many more will help in transforming the situation.

Smart budgeting is not about living cheaply. It is about spending purposefully.

FAQs

1. Is it okay to live on EMIs?

Only if your total EMIs are under 30% of income.

2. What’s the best way to avoid overspending?

Track every expense and limit impulse buys.

3. Should I involve my children in budgeting?

Yes, age-appropriate discussions help develop financial discipline.

4. How can I manage my expenses during festivals or weddings?

You should set a fixed budget in advance. Also, use only cash or debit cards to limit spending.

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LoansJagat Team

We are a team of writers, editors, and proofreaders with 15+ years of experience in the finance field. We are your personal finance gurus! But, we will explain everything in simplified language. Our aim is to make personal and business finance easier for you. While we help you upgrade your financial knowledge, why don't you read some of our blogs?