How To Avoid The Number One Budget Breaker

One important step in setting financial goals is establishing or reviewing your budget. After all, how can you tell your money where to go if you don’t know where it’s been?

Pay attention to this as you look back

Notice that as you review your spending on a month by month basis, there is most likely something that negated your efforts to save – a last minute gift, celebratory dinner, travel for the holidays, a kids activity, even just a party had to bring supplies to. These things cost money and not an insignificant amount. And this is where all that extra money is going. It’s not the daily latte or ordering take-out or a splurge at Target that kills most of our budgets. It’s the happy fun things – the things that, I think, make life worth living. It’s these things that we end up spending our “extra” money on instead of putting those funds toward our financial goals.

 It’s not the daily latte or ordering take-out or a splurge at Target that kills most of our budgets.

But I’m not saying you shouldn’t spend that money. What I’m saying is you can actually plan for these expenditures so you can still stick to your savings goals. You knew that most of these expenditures were going to happen way before the money left your account. In fact, I bet you can probably predict most of them for the coming year right now.

How to better plan for upcoming expenditures

It’s easy to budget for the monthly bills — even though the electric bill may vary wildly depending on the weather, you have a general idea of how much to reserve to pay it. It’s these other things that are tough to put into a neat monthly bucket. Rather than tearing your hair out trying to stick to spending limits in different life categories, try this way of getting ahead of “life stuff.”

Instead of trying to work these things into your everyday spending, make them part of your financial plan by mapping them out in advance. Here’s how:

  1. Get out a blank calendar
  2. Get out your date book/iCalendar/house calendar
  3. Write down all the commitments you’ve already made outside your normal routine
  4. Include weddings, vacations, graduations, holidays, babies that are due, etc.
  5. Then go back and write in all the regular stuff that comes up: trips to the vet for the dog, vehicle registrations, kids’ sport fees, etc. You might want to use last year’s spending to make sure you don’t miss anything
  6. Assign an estimated dollar amount to every single thing
  7. Add it all up and divide by 12
  8. Set that amount aside each month in a separate savings account

When I did this, I realized that almost every month I had some type of travel planned already. I also realized that my dreams of spontaneous camping weekends in Wisconsin may remain dreams unless I start planning them right now. You’re busier than you think!

Things cost more than you think

This month it’s a weekend in New Orleans, which was booked on airline and hotel points, but will still require several hundred dollars in order to enjoy the culinary mecca. This is money that I might otherwise allocate toward my goal of buying a new tennis racket. Next month, it’s a trip home for Father’s Day. That’s at least $100 in gas money not to mention a gift for my dad and greens fees when I pay for us to shoot a round of golf.

While I’ve already budgeted for a trip to Oregon wine country with my mom this fall, seeing that listed along with the other little weekend things coming up was a huge financial eye-opener. And we don’t even have kids stuff to budget for! (although every trip does require a cat sitter, so there’s that) It’s these things, these happy life things, that are your biggest budget busters.

It’s these things, these happy life things, that are your biggest budget busters.

Pay attention to these seemingly financially insignificant events on your calendar and put them into your spending plan now. This process also helps you gauge whether your savings goals are realistic.

By doing this advance planning, you should still be able to achieve whatever financial goals you are working toward such as paying off debt or building up your savings – those less “fun” but still essential goals. Knowing in advance that this money will be spent anyway actually does motivate me to cut back on my wine or clothing budget in a way that just trying to “make it all work” doesn’t. Try it and let me know how it works for you.

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