The Mint Grad

Avoiding budget pitfalls

Budget-pitfallsWhen life throws you curveballs, sticking to a budget can become a challenge.

Your car gets a flat tire, your phone needs to be replaced, or you make an unplanned trip to the doctor. If you haven’t set aside emergency savings, these unexpected events can wreak havoc on your finances.

But budget busters don’t just come in the form of unforeseen emergencies. Think of budget busters as a normal part of L.I.F.E. – an abbreviation for ways life can thwart even the best-laid budgeting plans.

Once you know what the common budget busters are, you’ll be better equipped to deal with them.

L.I.F.E. stands for:

Initial-CapLListed items under-calculated

This refers to items that you may have “listed” in your budget, but vastly under-calculated their true costs.

Take your cell phone bill, for instance. When you write the cost of your cell phone plan in your budget, do you simply jot down the flat monthly fee? That works… if your actual bill is, say, $49.99 per month exactly as advertised.

However, what if you’re a real talker – or text addict – those allotted cell phone minutes are likely to run out much quicker than you realize.

If this is the case, your true cell phone bill could be nearly double what you expected. So when you’re budgeting, make sure you’re using accurate, realistic numbers for all your expenses.

Initial-CapIImpulse purchases seduce you

The “I” in LIFE stands for those “impulse” purchases that nearly everyone makes now and again. But if you’re a chronic impulse spender, that can do serious damage to your finances – and to your budget goals.

Luckily, there are a few easy solutions to stifle the spender:

One idea is to shop with a buddy. A reliable friend can help you stick to buying only pre-planned items and things for which you’ve budgeted. Also, if you tend to whip out your credit cards for impulse purchases, leave your credit cards at home more frequently.

Finally, if spur-of-the-moment, online shopping is your weakness (Groupon anyone?) stay away from logging in to all those daily “deal” sites. After all, even if a product or service is 50% off, it’s not really a “deal” if you don’t need it and can’t afford it in the first place.

Initial-CapFForgotten bills surface

The “F” in LIFE stands for “forgotten” bills. These are typically expenses that get paid annually or maybe twice a year. Don’t let costs, like your yearly car registration or annual fees to membership organizations, sneak up on you.

When you sign up, renew, or subscribe to a service, remember to save your receipts or any confirmation letters that detail the costs and length of time you just committed to. Make it a habit to add these costs to your written budget as soon as possible. Once they’re in writing (with the rest of your expenses), they’re practically unforgettable.

Initial-CapEEmergencies or unexpected events happen

Lastly, the “E” in LIFE is for “Emergencies” – the events that always seem to happen when you’re least prepared. There goes your budget, right?

Not necessarily. Rather than repeatedly dealing with one budget-busting car problem after another, consider planning ahead for routine auto maintenance to prevent those problems. Or, make sure to schedule that follow-up appointment at your dentist (preventative care is just that – PREVENTATIVE!).

Once you realize that LIFE happens to everyone, you can take actionable steps to keep your finances running smoothly (like saving a little extra to cushion your budget from any unexpected blows).

For more ideas on how to spot and avoid your own budget busters check out the Budget Busters Tool in the Try It section, and get your personal budget back on track. Also, in case you missed it, be sure to see our related article,  Budget Real Talk.