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6 Budget Pitfalls to Avoid

More than 52% of Americans spend more than they earn, according to a survey conducted by Rasmussen Reports for Country Financial Group, with the average consumer spending $1.33 for every dollar they're paid. With median income for 2012 at approximately $50,000, that means $16,500 of overspending each year. To make up the difference, 36% eat up savings while another 22% use loans and credit cards to keep up.

Though a budget only solves some of the factors involved with habitual overspending, it's also one of the easiest solutions to apply...provided families avoid rookie budgeting mistakes that can turn this financial tool into another opportunity to spend too much.

1. No Savings Plan

The default position for most Americans is to save whatever's left over at the end of the month, which explains why the Employee Benefit Research Institute found that 30% of Americans had $1,000 or less worth of savings and investments. Over half hadn't even calculated how much they need to retire at a lifestyle similar to that they have while working.

Avoid this mistake by "paying yourself first." Include a savings line-item, based on your retirement plans, and make an automatic deposit on payday, or once a month.

2. Not Tracking Actual Expenses

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Setting up the best family budget in the world does no good without checking to confirm spending actually matches the projections on that budget. That same Rasmussen Report found 21% of Americans make this mistake at least six months out of every year. It's an expensive disconnect, made most often because of how much time people think reviewing a budget will take.

Beat this by keeping your budget simple. Use broad categories along with automated services provided by most banks' online options, to make it as quick and easy as possible.

3. Ignoring the Small Stuff

Most family budgets do well accounting for rent, utilities, car payments and other large expenses, but can fail to include the small daily expenses that are part of life. Financial writer David Bach calls this the "latte factor," based on the fact that a daily latte doesn't feel like a real expense, but can add up to $1,200 a year. Other examples include eating out for lunch at work ($2,000 a year) or smoking a pack of cigarettes a day ($2,011 a year).

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The solution here is not to forbid yourself the little indulgences that improve your quality of life. Instead, it's a matter of budgeting for those treats so you don't have a surprise at the end of each month.

4. Using Cards for Everyday Purchases

You already know at an intuitive level that doling out cash hurts more than swiping a card. Dunn and Bradstreet studied exactly how much more, and found that people will spend 12 to 18 percent more when shopping with plastic than when shopping with cash.

If you have this habit, you can use an "envelope system" for everyday spending. Label envelopes for categories like "dinners out," "shopping" and "mad money" and place your budgeted amount in each. When the envelope's empty, you're done with that kind of spending until payday.

5. Not Planning for Emergencies

Financial emergencies range from getting laid off, to becoming disabled, to engine failure on the family car. A study by Bankrate found that one-quarter of Americans have no emergency savings at all, and another quarter had only minimal savings. This means eroding savings or using credit any time a financial contingency interrupts the usual budget.

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Fixing this mistake is simple, but not always easy: find the money to create an emergency fund. Using the "pay yourself first" method from rookie mistake #1 is one of the easiest ways to make this happen.

6. Giving Up

The National Foundation for Credit Counseling's 2012 Consumer Financial Literacy Survey found that over half (56%) of Americans have no budget at all, and that 22% don't have even a broad sense of how much they spend each month. Some of these families had a budget, but gave up because it was too complex or too discouraging. Others gave up before they even began, intimidated by the time and energy it would take.

Solve this rookie mistake by taking a page from Winston Churchill, who famously said "Never give in -- never, never, never, never."

A budget is just another tool, like your email and your screwdriver. Use it right and maintain it well, and it will help you build the financial situation you want. Use it wrong or let it rust from disuse, and it's just another piece of clutter taking up space in your life.