Thursday, August 22, 2013

Thrifty Thursday: Budget Busters

Are you ready for Step 5?  If you missed Step 1 , 2, 3, or 4 check them out and determine your expenses and income and how to make a spreadsheet (here and here and here and here).

 Dr. Oz and experts list the four budget busters:

1. In the budget but you under calculated
2. Impulsive purchases
3. Forgotten Bills or Expenses
4. Emergencies

We don't have a lot of under calculated expenses or impulse purchases but bills often change.  I try to keep a record of last years bill amounts so that we can estimate the bills for this year off of those.  It is always hard to remember that the electric bill spikes in the summer because that air conditioner goes on.  Most bills are cyclical and doing the spreadsheet year after year really helps to have a base line to calculate.  The first year is the hardest because you really have to think and calculate but it is way better to over estimate instead of underestimate.

We don't do impulsive purchases.  We always find things that we like and we make a list of things that we want or might need.  If they are things that we still want or need after 30 days, then we think about how we can best get them or when we need them.  We used to buy everything impulsively before a budget but now we know that it isn't in the budget then it doesn't get purchased.  If you have trouble sticking to that then you have two choices, budget a certain amount of money that you can spend on impulse purchases a month or stay out of the stores (or off the computer if online is your weak area).

After doing our spreadsheet for five years, we don't have a lot of forgotten bills or expenses but it is bound to happen especially the first year.  You forget to calculate school supplies and clothes for the kids or getting hair cuts.  These things add up quickly but it you write a list of all of the items that you think that you spend money on, you can add those items to the spreadsheet (or create a second spreadsheet if yours is getting too big and too complicated).  Most of the bills that are forgotten are the bills that are set up automatically.  Do you have your gym membership pull monthly or yearly out of your checking or credit card?  It is still an expense and needs to be recorded on the list.  The other items that are forgotten are those things that only come up once or twice a year.  Don't forget Christmas presents, gifts for birthdays and other occasions, taxes, and more!  They might not seem like a lot but when you are budgeting, forgetting to include gifts will be really sad later when you don't have any money to spend on them!!

Also, if you are not paying off credit cards, you need to have a column for interest so that you can see how much money you are wasting by not paying off all of you bills when they are due.  Many people forget that part of the bill and it stacks up quickly making it hard to overcome debt.  Make sure you are aware of where your money is going and how much you are spending just to use your credit cards.  It might give you a second thought when you pick up an impulse purchase at the store!

We have most of our extra emergency expenses listed into our credit card line because we pay them on credit card (we get points that get transferred back to the card as a statement credit).  If there is an emergency to repair our car or replace the air conditioner, we do use our credit card but we pay it off in full every month. If the company doesn't take credit cards, we get a cashiers check.  Either method we are using our savings which we have set aside for just such emergencies.  We do have emergencies every year and they luckily seem to stay about the same even though the emergency changes.  This year it was a big car repair for my husband's truck, new tires for my car and a new air conditioning unit.  Last year, we got some masonry work done to fix our front stairs and walk way (and probably some car repairs).  If you have a weakness with credit cards, make sure you set up a system that works for you and that you can continue to support without going into the negative by using credit cards and not paying them off.

Do you prefer to figure out based on the percentages or filling in your actual information into a spreadsheet?  I am much more comfortable filling in the spreadsheet and getting all of the information where I can see them and play with the numbers.  If the numbers are still showing that money is going into savings and things are in the positive then you are in a good spot.  If the numbers are in the negative, you have to figure out how to cut some expenses and fast (but more on that in another post).

When I was deciding to stay home with my son, I used the spreadsheet to convince myself that we could do it and make ends meet.  I didn't know how but when I saw it in black and white on the spreadsheet, I realized that we could make it work without using all of our savings.  We just cut a few expenses and we work really hard to not spend our savings and use only the money coming in.  It is a challenge that I accepted when we decided that I would stay at home and we have been really good about making ends meet and still putting a little money into savings every year after all the expenses.

After you set a budget, it is important that you don't let all your hard work go to waste.  Don't bust your budget with these common mistakes.  I hope that these made you stop and think and add a little cushion on your spreadsheet to help make sure you don't bust your budget.

If you are interested in this post, here is the link to all of the posts in the series:

Figured out expenses
Figured out our income
Made a Spreadsheet
Making a Budget
Setting Your Budget and Spreadsheet
Budget Busters
Take the Emotion out of Budgets

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