The Top Ten Things that Ruin Budgets

atm pad

By Mitchell D Weiss

Budgets are a necessity to keep personal finances in order, but they aren’t necessarily easy to keep.There are plenty of things that can quickly ruin a budget and ruin the best laid financial plans. Here are the top ten things that ruin budgets:

Shopping Hungry or without a Plan of Attack

This one’s obvious — don’t go food shopping hungry and be sure to have a list in hand. Otherwise you’ll blow your budget. Also, carefully consider moving up to larger, economy sized products. Compare cost per volume or weight and also, focus on the shelf life because you’re going to have it around for a while longer.

Frequent ATM Use

Most of my students hit the ATMs more than 2 or 3 times a week. They take out $20 per withdrawal because they don’t like carrying around lots of cash — either because they’re afraid of spending it or having it go missing. But frequent ATM use can lead to budget problems because you may lose track of the total amount you’re withdrawing from week to week. You may also forget to record a withdrawal or two, which can lead to overdraft charges. And, frequent ATM use can also lead to ATM charges, when the machine you need to use to pay a restaurant check isn’t your bank’s.

Moving in with Someone

When you move in with someone, there are a lot of things to take into consideration including how to split the rent, food bills and other living expenses. Should it be 50/50? What if one person earns more than the other? Should one party pay the bills and the other save the money? Who gets what if you end up apart? And what about preexisting debts? All of this needs to be discussed in an open, cards-on-the-table manner because, after all, one of the top 5 reasons for relationship failures is money issues.

Out-of-pocket Expenses (cash)

I like budgeting for the amount of money I carry around each week. In fact, my wife and I have been doing that for more 35 years! It’s the only sure way to stay on target with a budget.

Unexpected or Unbudgeted Repairs and Maintenance

This is why it’s important to have a “savings stash.” Unhappy surprises like these can easily tank a month or two or three. Another strategy would be to have 2 credit cards — one for routine expenses that fall within your budget, so that you avoid carrying a balance. The second card would then be for the unhappy surprises that need to be paid over time. That way, your credit card interest costs will only be limited to those charges and NOT for all of the others you make every month and typically pay in full.

Uninsured Losses and Unfunded Deductibles

Higher deductible limits help us to save money on our insurance premiums, which is a great strategy as long as you set aside the dollars you’ll need to cover those deductibles, just in case.

Borrowing without a Plan of Attack (student loans, credit card debt)

There are three things to say here. First, only borrow through the various government programs. The cost is less and the repayment flexibilities are superior. Second, don’t borrow more than what you believe your first year’s salary will be after college. That’ll keep the monthly payments within reason. Third, roll the tape forward by estimating what those monthly payments are going to look like, so that you know what the consequences are going to be for you. There are plenty of online calculators that can help you to do that. In particular, check out the one on

Fees that are Avoidable (late payment, overdraft)

“Avoidable” means just that — don’t let it happen! Late payment fees, overdraft fees, balance transfer fees, cash advance fees all DRAIN CASH. What’s more, they cause the “true” interest rate you’re paying to spiral out of control. Check out the impact by playing with an online APR (Annual Percentage Rate) calculator.

ID Theft Crimes Involving Debit Cards and Paper Checks

I don’t like debit cards for two reasons. First, while the Electronic Funds Transfer Act protects you from fraud, it’ll still take some time for the bank to feel confident that YOU aren’t the one perpetrating it. Consequently, you’ll have to find the cash you need from some other source in order to pay your monthly bills. Second, debit cards don’t have what are known as “chargeback rights” that you’re otherwise entitled to with credit cards. Should the merchandise you purchase not be as promised or, never end up being delivered in the first place, you’ll have to negotiate with the merchant for your refund. By contrast, credit card companies are required by law to set aside any charge that you contest until the dispute is resolved. The money won’t leave your checking account until then.

As for paper checks, know that the banks hold YOU responsible for keeping them safe. If someone were to rip out a check in the middle of the book, write it to themselves and sign your name to it, your only recourse will be to take them to court. The bank won’t refund your money.

Job Loss and Income Curtailment

When financial distress occurs, it’s very important that you deal with it promptly and in a straightforward manner. At the same time though, your lender is going to want to know that you’re doing everything you can and should to deal with your problem. That includes ensuring that you’ve plugged every budgetary leak by curtailing the extra expenses while at the same time, maximizing your income. It also means selling the stuff you don’t need — which is why God invented Craigslist — and using that cash to pay down the principle on your loans and NOT some of the monthly payments. That’s because each payment has an interest component attached to it. Instead, you want the most bang for you buck and a principle paydown is the way to get it.

Mitchell D Weiss is the author of the book Life Happens: A Practical Guide to Personal Finance from College to Career. You can find out more the Life Happens website and the Life Happens blog.

(Photo courtesy of redspotted)

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10 Responses to The Top Ten Things that Ruin Budgets

  1. Jay says:

    Ah, “Unexpected or Unbudgeted Repairs and Maintenance” — the bane of homeowners!

  2. Bane is right! These and insurance deductibles are truly unhappy surprises. All the more reason for a healthy savings stash.

  3. Rosie says:

    I agree to every one…can I add one more…adult family members and adult children who ask for money to meet their expenses due to their inability to be responsible and budget.

  4. Jay says:

    Do you agree with the recommendation to set aside, for repairs and maintenance, 5-10% of your home’s value per year? Argh….!
    Regarding deductibles, some are predictable (e.g., auto); others (like all the medical insurance caveats) are harder to predict. Access to and funding an FSA can help tremendously, though.

    Great article, as usual. Thanks!

  5. Depending on the value of the house, 5-10% is a pretty big nut to crack. Instead, I’d suggest putting a dollar value on the things you’d like to do (update bathroom, kitchen, new deck, etc.), do a timeline for them and then, set up a savings plan that works with your budget. As for the house, car and healthcare deductibles, to the extent you can, they should really be covered up front. Good luck!

  6. Jay says:

    Good point(s) and a logical, common sense approach. Makes it feel doable, with planning!.

  7. Thanks, Jay. It’s the same way the undergrads are learning to deal with these things in the course I teach—set the objectives, do a timeline, make a plan.

  8. I agree, Rosie, enabling adult children is not only a budget-buster, the longer term implications can be even more serious. What will they do when the money runs out or, when mom and dad decide to say “no?” Our kids are grown and making it on their own, which gives my wife and I the ability to decide if, when and how to help, as opposed to being asked or expected to do so. In fact, if it were expected, I’d probably not be so inclined.

  9. Sandy says:

    These are all so true, especially uninsured losses and unfunded deductibles. Those of us who are self-employed, for example, can save a lot with a high deductible health insurance – unless there’s no money in your HSA when you need to use it. It’s essential to plan for that rainy day, little by little, while the sun is shining.

  10. Gail says:

    What is really rough is the self-employed person that can’t get health insurance due to pre-existing conditions. Just enough assets to not qualify for help, but barely enough (if that) to pay for the medical bills. One does the best one can and that includes living an extremely frugal lifestyle.

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