In honor of Financial Literacy month, we’re pulling out some vintage posts on financial basics.

I can’t save anything because it takes every dollar I make just to get by.

Sound like a description of your budget?

For some folks, that is absolutely true.

But for another slice of working folks, there’s some black magic budgeting going on that hides what’s really afoot.

These voodoo budgets look rational, but only on the surface.  If there were two budget line items:  1) food, and 2) groceries,  you’d see the duplication.

But what often happens is more subtle.  Meet the twins of budget self deceptions.

Budget Blunder #1:  Electronic entertainment

Got cable?  More than basic cable?  Do you also budget for entertainment, eating out, vacations?

Whoa!

What is premium cable if not entertainment?  You can probably say the same thing about data on smart phones.

These services make our days brighter.  But the cost has to be counted against the same budget category as other non essential pleasures.

Somehow, smart phones and HBO have become, in our minds, utilities or basics, rather than embellishments.  Once you count them as a given expense, then it’s easy to say, I have nothing left to save for the unexpected emergency or the absolutely expected old age.

Put digital diversion in the entertainment category when you lay out your budget.  Putting like with like, you can assess whether the allocation of income makes sense.

Then you can ask whether you can get what you’d like for less, or,  whether you’re paying for more than you use.

Budget Blunder #2:  Credit card payments

Credit card debt service is the second twin in the world of smoke-and-mirrors budgeting.

Monthly payments on credit cards now rate their own line in most budgets.  If you’re carrying a balance, some part of this month’s income is going to pay for last month’s spending.

But what did you buy with your credit card?  It’s not as though those purchases are distinguishable from the rest of the categories in your budget.

You probably bought gas, clothes, movie tickets, meals out.

By creating a separate cubby in your mental budget for payments on your credit card, you’ve hidden some part of  what you spend on transportation, clothes, and entertainment.

Cut through the smoke and mirrors

So, banish voodoo budgeting from your life.

Pull out your cable and wireless bills.  Read through where you used your credit cards last month.  Push those purchases into the right categories.

See if your spending is skewed in a way you didn’t see before.

Image courtesy of Theilr