5 family budget busters (and how to overcome them)
By Dawn Papandrea
June 3, 2015
Living on a budget is a savvy financial habit, but are you leaving enough room for all those unexpected extras that seem to creep up from out of nowhere?
Those pesky fees, social obligations and our desire for entertainment and convenience that we don't account for can add up quickly. And, if you're not careful, guess where those expenses end up? Tacked onto your credit card bill!
“People many times overspend on things that are within their control,” says Joe Heider, president of Cirrus Wealth Management. “Credit cards make it so easy when you run short, until you have a problem because you lose sight of all these little expenses.”
Take a look at some of the cash culprits wreaking havoc on a typical family budget, and how to better plan for them (or cut them out of your life).
1. Budget buster: Automatic subscriptions or things that auto renew
Whether it's your satellite radio subscription, magazines or gym memberships, those things that are automatically billed each month can get beyond your control. “It's so easy to let these things slide,” says Heider. It could be $80 here, $15 there, and sometimes, it's for things you're not even using.
Heider suggests doing some evaluating every time a recurring charge hits your statements. “Take stock of what those subscriptions are, and go figure out which ones you use and don't use,” he says.
Sometimes people get caught up in this budget trap after signing up for a trial promotion that later turns into an auto subscription that they simply forget to cancel, says Randy Hopper, vice president of credit cards for Navy Federal Credit Union. “Make sure you understand when a promo period expires, and make a decision whether or not the value you get out of it is worth keeping. Or, research to find a better option,” he says. Being organized with your account information will make it easier to call or log in if you want to pursue cancellation, too, since most providers don't go out of their way to make it easy for you to do so.
2. Budget buster: Parties
Every time you turn around, there are kid birthday party invitations, baby showers, graduations, weddings — and they all involve gift giving. Then there are your own parties and events that always seem to cost beyond what you initially thought you'd spend. “Particularly with a special occasion for children, it becomes this one-upmanship in which you find yourself saying, 'It's only a couple hundred dollars more.' You want to provide the best for your children, but the best should be within your budget,” says Heider. The idea of “rewarding” yourself or your family with an extravagant affair will eventually come back to haunt you.
“You want to provide the best for your children, but the best should be within your budget.”
–Joe Heider, Cirrus Wealth Management
As for financially surviving the social occasions that do come up, Hopper recommends setting aside a little extra in your budget if you know that you have several weddings in one year, for instance. Buying gifts in bulk or on clearance can also help, especially with the kid birthday circuit. And don't get hung up on buying a new outfit every time there's a party, especially if it's with different groups of people.
3. Budget buster: Convenience items
There's no need to stress over your occasional latte habit or if you pick up a bottled water on the go, but consider this: If a family of four each buys a morning beverage, water and a vending machine snack five times per week, you're potentially looking at $100 a week!
“When you have a family, you have enough usage that you shouldn't buy all single servings,” says Heider.
Hopper agrees, and says that brown-bagging it really can have a positive impact on the family budget. “Streamline how you manage your time and you can make coffee and lunch at home,” he says. Take it a step further and plan weekly menus around grocery sales, and chop your own fruits and veggies, so you're not relying on takeout or overpriced prepackaged items.
4. Budget buster: Fees
Visit a few out-of-network ATMs in a month, and you'll pay $2-$4 a pop. Add to that credit card annual fees, checking account maintenance costs, overdraft and late charges, and suddenly your fees have turned into another bill. “It's not a bad idea to review your banking relationships and see how many fees you've incurred on an annual basis,” says Heider. “Most people are reluctant to change banks, particularly if you use online banking, but most banks will assist you with changing over your bills,” he says.
It's important to understand the fee structures on all of your financial accounts, adds Hopper. For example, only some credit cards offer no foreign transaction fees, which can be a big deal if you travel out of the country. “Ask questions prior to any financial services activity you're going to do so you can understand the potential costs you're going to incur,” he says.
5. Budget buster: Vacations
Besides the fact that sometimes families go on “plastic vacations” — the ones that only happen because they are paid for on credit — even getaways that people save for can end up destroying a budget.
“When it comes time to leave, you want to have that budget mapped out for the time you're away,” says Hopper. Otherwise, it's easy to overspend on meals, upgrades and souvenirs when you're in carefree vacation mode. Try to be as realistic as you can when planning, while leaving room for enjoyment. “Not losing your discipline through those big events is critical to sustaining the progress you have made the rest of the year,” he says.
Not wanting to spend more than you intended is one of the reasons why all-inclusives are so popular, says Heider. “You know what the vacation is going to cost up front, so it's easier to budget,” he says. Even if you don't go that route, try to adopt that philosophy by allocating a certain amount of money each day or your trip, researching what things cost in advance, and being frugal when possible on the things that are less important to you.
As with anything else that involves money, the more planning and saving you can do, the better off you'll be. Having a “splurge account” in addition to your emergency fund, for instance, is a good way to counteract those savings suckers as they appear. With a little practice and creativity, you'll be able to find ways to reduce or eliminate the impact of any budget buster that comes your way.