Budgeting is one of the major cornerstones of financial planning. You set up a budget and try to stick to it, but every now and then you…well things happen. What are some of the biggest budget busters?

1. Too Little Savings
The most common and dangerous budget buster is not having sufficient money in your emergency fund. It is generally recommended to have 3-6 months of income in an emergency fund for unforeseen events. If you do not have a sufficient amount saved in your emergency fund, any small-unexpected event can throw off your budget and send your finances in the wrong direction.

2. Too Much on Credit
Yup, the good old credit card. I am not against using credit cards, they can often be a good part of your financial plan, but putting too many purchases on credit and then only paying a small portion of the balance spells disaster. Overloading credit cards is one of the biggest budget busters and its long-term consequences can be devastating to your finances.

3. Too Much Gift
I often advice people to set aside a small amount every month in their “Gift fund” and use it as needed. This can help you stay within budget when buying gifts. If gifts are stretching your budget then consider cutting back a little bit, there is no need to impress others with expensive gifts when you cannot afford it.

4. Too Much House
Should you buy a home or rent? This debate will continue for another few decades. Buying a home is usually not a big deal as long as one remembers to take into account all the carrying costs of a homeownership such as maintenance, taxes, repairs and so on. Buying too much house can be a big blow to your budget, the bigger the house the higher the carrying costs. Buy a house you can live in comfortably and fits within your budget.

5. Too Much Car
Very similar to too much house, too much car is another very common budget buster. A car is often like a child, it needs constant attention and expenses can easily consumer a large portion of your budget. Insurance, repairs and gas costs should be a primary concern when purchasing a car. Buy a small used vehicle that will not blow your budget.

My Personal Budget Busters:

Above are the five most common budget busters, however none of them made it on my personal budget busters list. I try to stick to my budget as much as possible, but like most people every now and then it goes …bust! Here are my top three budget busters:

1. Poker Night
Ones or twice a month my friends and I get together for a few “friendly” poker games, sometimes I just get carried away and blow my budget. Although this does not happen often, when it happens it’s pretty deep.

2. Going Out
Going out is another one of my personal budget busters. Although I know what my budget is for going out, when with friends I just forget about the limit I have set and…boom.

Got to love electronics! I can easily walk into an electronic store and walk back out with a few hundred (maybe thousand) dollars spent. Now I stay as far away as possible from electronic stores.

What are your budget busters? How do you avoid them?


Ray is an ex-financial adviser and the founder of Financial Highway. Currently working in the financial industry and working towards completing his Chartered Financial Analyst, CFA, designation.