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.
3.Gadgets
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?
Eating out. My wife is admittedly a bad cook and I haven’t made the effort I should to teach her. Eating out is both easy and fun and delicious. But it’s bad example to set for our children both financially and health-wise.
For a while, online shopping would get me. I was on eBay daily looking for anything to buy, and putting it on my credit card. There was something about doing it online that made it feel OK, but then I would get my credit card bill and realize how much I have spent.
My biggest budget buster is food I guess. I have not been cooking lately but have been buying packaged food e.g. garlic shrimp and boxed mashed potatoes, where there is little to no preparation needed. I know these are more expensive but they are such a time saver.
I recently noticed that those are making me go over my food budget by about $50 a month so I really need to start cooking from scratch again.
Budget busters for me are:
1. Eating out: my husband has a demanding job and sometimes we can only get quality time by eating out. We have been compromising and getting cheaper food, bring our own pop and sit in the car by a local lake.
2. Magazines and books. I love reading and love books. I have to take someone with me to a book store and ignore Borders/Barnes and Noble on-line. It is like an addiction.
3. Helping our 25 year old too much! He doesn’t expect things I just want to do it (he’s my baby)
This is a short list. It does give me food for thought.
Great post. Lack of sufficient/any reserve fund is very deservedly #1. I generally recommend that my clients strive to keep six months worth of living costs in a very liquid account, with three as the bare minimum. It can seem a bit daunting, but unfortunately everyone will need to to use it at some point and you can’t even imagine how thankful you’ll be that you’ve put in place.
My personal budget buster? Yoga! I absolutely love and it and frequenting great teachers at nice studios is my personal vice.
I would say travel and wine:
Travel, because when I’m on holiday I tend to spend a lot more than usual (restaurants, spas, souvenirs…), rationalizing “Oh it’s only once in a while. Come on you are on vacation, enjoy!” and the like. And my spouse is the same 🙁 We are not light travelers.
Wine, because for me food goes with wine, and I love to try new associations and finding the hidden gem. I tend to have cheap regulars for everyday use, but from time to time, I spend a few hundred bucks on new bottles and have family and friends try them out. Or they just sit in my basement for later use.
Thanks for all your great writings!
(like many others) Eating out and sometimes Eating in.
Too often we look in the fridge or pantry and then just go out to eat. Them there are the times we look in the pantry or fridge and go buy something to cook, regardless of the fact we have tons of food going bad on our shelves.
A little planning helps a lot. I wish there was a way to inventory what we have and then come up with a menu based on that…
We budget for everything including vacation and entertainment, so I would say that my biggest budget buster would be “unexpected” expenses such as home repairs and medical. When something comes up during the month that we weren’t planning on, it eats into the reserves we put aside to pay down debt, so that is frustrating.