Updated: Jul 22, 2018
When you are trying to get yourself and your family out of debt, there are so many simple things that will destroy your budget. An expert at budgeting, Nathan Lippincott, shares the habits that can damage your budget and ways to avoid them.
A good way to look at a budget is to approach it in the same way that you would a diet. You may stay on a diet perfectly for a few days, but all it takes is a few days of binge-eating on carbohydrates or sugars and we’ve ruined the entire thing. We may have an ideal budget set up and follow it closely at the beginning, but if we sabotage it, we will again begin to falter financially.
However, for both a budget and a diet, the only true failure occurs when we quit altogether. It is much more realistic and empowering to identify ways in which we may be tempted or mistakes we may make and then take steps to prevent them from happening. This will definitely minimize potential damage or perhaps avoid it altogether and keep us on a path to success.
Budget Sabotage: Impulse Purchases
One of the first ways in which we can sabotage a budget is with impulse buying. We work hard and while it is true that effort deserves reward, it is all too easy to tell ourselves, “Well, I deserve this!” and purchase out of a desire for instantaneous gratification. In contrast, you should think the purchase through, which includes considering whether you really do deserve it, as well as if you can actually afford it.
If you cannot afford a purchase, it does not matter how much we feel we may deserve it – making a bad financial decision will only end up clouding any joy the item or experience may bring. Buyer’s remorse is a real thing and it has more repercussions than just feeling guilty.
Make a rule that you may only spend a certain amount of money without discussing with your spouse (if married) or, if you are single, a certain amount before consulting your budget and crunching numbers. If you do decide to proceed with spending more than the allotted amount, always give yourself 24 hours – or at least overnight – before doing so. Often, time and distance from the emotions/excitement evoked by the potential purchase will be enough for someone to decide whether it is worth it or not. I have found that in the vast majority of cases, it won’t be.
Budget Sabotage: Going Out to Eat
Another category that has the potential to ruin a good budget is eating outside the home. It is very easy to spend a fortune on dinner out (especially if you have kids!)
Savings Tip: One especially potent savings tactic is to order water for everyone’s beverages. Drinks at a restaurant typically cost about $2.99 each. If there are four people drinking them, that is $12.00 pre-tax. If your family eats out twice a week, that is $24.00 per week in drinks, which is a total of $1200 a year! If you take $1200 per year, and invest it for 30 years, at a 10 percent rate of return it could have grown to $217,000! (Don’t even get me started on the total and potential investment of money spent on alcoholic beverages!)
Budget Sabotage: Vacations
Vacations are great, and we all need to take them, but you must do so wisely. Too often, I see people use credit cards to pay for vacations they simply can't afford. This can really put people in a financial bind. Who wants to go on a (deserved) vacation and then have it haunt their lives for the next three years while they scramble to pay for it (with interest!)?
Instead, make a plan and save! While saving, you can still enjoy “stay”-cations until you have the funds built up for a trip away from home. There are many things close to home that can be fun for you and your family and will not cost a fortune. You may actually be able to do more activities since you won’t be paying for a hotel room. Choose to spend very little on this for your first year and make a calculated plan and savings schedule for where you want to go during the next year.
Total up what your vacation would cost and then divide by twelve so that you can save each month and leave when the funds are ready. The anticipation of the vacation will only be amplified when you know that it will come without financial stress.
Budget Sabotage: Emergency Fund
Some individuals sabotage their budget with their own emergency fund. An emergency fund is for just that – true emergencies. These are things like a broken down car, a household necessity needing replaced, a medical situation, etc. Things like a night away from the kids, an item on sale, or a nonessential household item replacement are not emergencies.
If you spend your emergency fund on things that are not literally unexpected emergencies, then you will have no money when the real crisis arrives and therefore will have to borrow or charge the costs. That is how debt occurs. Always make sure that you sequester some kind of emergency fund before you begin to pay off debt – and then don’t touch it unless required to!
Budget Sabotage: Groceries
Some may be surprised to hear that groceries can also ruin a budget. This is due to the adage, if you fail to plan, you will plan to fail. If you just go to the store without a grocery list or idea of what the week’s dinners look like, you will spend a fortune (and half of it will be impulse buys). It is important to make meal plans and then ingredient lists so that there are no unnecessary purchases.
It is safe to say that a very large portion of every family’s budget goes towards groceries, so it is especially useful to have a plan in place and save wherever possible. In addition to your lists, try going to multiple stores. Try shopping for things at less expensive places (Aldi, WalMart, Big Lots, Dollar General, etc) and then picking up what you cannot find at higher end stores (for example, healthy meats and organic produce). The idea is to save money and sometimes a little more time and effort has huge payoffs in that regard.
Identifying and discussing these methods of self-sabotage will go a long way in preventing them from happening and will keep you on the budget you worked so hard to create. Mistakes are always a part of any plan, and nobody is perfect – but knowing the common pitfalls ahead of time will keep any setbacks to a minimum.