What’s Breaking YOUR Budget?
June 15th, 2007 | by rachel |
I have some good news and some bad news. The bad news is that, if your budget is broken, you are the person that broke it. The good news, however, is that your budget doesn’t have to stay broken!
Whether you have it organized and written down or not, you have a budget that is dictated by your income. Living within your budget requires that you spend less than you make in income. Your budget is “broken” anytime your overall spending adds up to more than your income for a given pay period.
Do you routinely “break” your budget? Do you have credit card debt that is increasing instead of decreasing? If so, you need to spend some time thinking about the specific expenses you have that may be breaking your budget. If you are like many consumers, you will find that the most common “budget breakers” are not large expenses…
1. EATING OUT - Even with reduced prices for “kids meals”, it costs $20 - $40 for a family of four to eat dinner at a casual dining restaurant. If your family does this just once a week, that could be adding $100 or more to your food expenses each month. If you add lunches out, trips through the drive-thru and multiple dinners out each week, you are paying hundreds of dollars each month that you could use for something else.
2. LIQUID REFRESHMENTS - Whether you drive through to get your coffee in the morning, walk to the break room to buy soda a couple of times a day or stop off to have a drink on your way home from work, you are literally pouring your budget into whatever (and how much) you are drinking. Reducing your intake and your expense by just a couple of drinks each week can add up to $20 - $50 in a hurry.
3. SERVICES/FEATURES YOU DON’T USE - Paying for extra features on your phone plans or buying extended warranties on your appliances or receiving a paper invoice instead of an email invoice are small amounts of money on the front end. Those charges add up, however, in the long run and many times, you are not even aware of the coverage you are getting or the services you are paying for. Chances are, if you go through your current charges and evaluate how much (or if ) you are using them, you can eliminate at least 1 feature or monthly payment.
4. FINANCIAL FEES - Banks and credit card companies are charging fees for almost everything they do for you and they are making FORTUNES for themselves because their customers are paying small amounts here and there. Check your statements to see how much you are paying in ATM Fees, Cash Advance Fees, Over the Limit Fees, etc. each month. If you can reduce those by half each month, you should be able to save at least $100 over the course of a year.
5. PAYING WITH PLASTIC - There are lots of reports that indicate that we spend more when we pay with plastic (debit or credit) than we do when we pay with cash. According to one report, charges at McDonald’s went from an average of $4.50 to $7.00 when customers paid with plastic. Certainly, $2.50 more is not a huge amount but if you spend that much more EACH time you go to McDonald’s, it adds up during a month or a year. Certainly, paying with a debit card is better than paying with a credit card because the money comes directly out of a checking account. The issue here is the PERCEPTION of the person spending the money and the bottom line is that it is easier and less painful to swipe a card than it is to count out cash.
6. MONEY YOU OWE WITH A FLUCTUATING INTEREST RATE - If you have a variable or adjustable interest rate on ANYTHING, odds are that your payments will go up over time. In the last few years, interest rates have been at 30 - 40 year LOWS. That means that they will likely go up before they go back down. Even if you pay more to close the loan and your monthly payment is higher, paying interest at a fixed rate will save you money over the full term of your loan. If you have fluctuating rates on ANY of your loans, start shopping today to see if and when you can convert them to fixed rates.
7. MONTHLY PAYMENTS - One of the reasons that so many people are drowning in debt is that they have bought into the idea of monthly payments. Salespeople and marketing professionals are always working to convince you to commit to a monthly payment vs. a full sales price. Not only do they receive interest on your monthly payments but you are more likely to purchase a more expensive item if you can make the payments over time. Certainly, one or two monthly payments are not sending us to the “poor house” but several $50 - $100 payments each month are making budgets harder and harder to maintain.
If your budget is broken, take some time to evaluate it and see if any of these “budget breakers” are part of the problem. If they are, take steps to reduce or eliminate these expenses and see what a difference it can make.