Budgeting is an important and powerful tool that can be used to curb impulse spending, assist you in meeting specific financial goals and ultimately can stop you from living from paycheque to paycheque. But even if you’re not the ‘budgeting type’, there are usually very clear warning signs of where your finances are headed. The worst we can do is hide from these warning signs. So this week, I’m looking at ‘budget breakers’. Little things that can easily affect your spending in a big way.
Now, some of these may seem really obvious to you, but most financial issues are often easier to spot in others, than yourselves. So without further ado, here I give you 5 potential big-budget breakers:
1. Giving into financial peer pressure
My brother once had a boss that, when he sensed one his top workers were ready to leave, he took them out for dinner and drove him around the block to chat about expensive homes or cars. Hoping by having the worker buy and get tied into an expensive asset, they couldn’t afford to leave. Ha!
Yes, we don’t all have kind bosses like that, but we also don’t need to be tricked to be tempted. Many people make purchases based on their peers. Yes, Sally drives a better car than you do, and Tommy always shows you the latest gadgets. Or you get sucked into going to all these events that you simply can’t afford, but you do it just to fit in. Stop living through them and make decisions based on your own financial situations.
Before you buy into the dream, see if you can afford it first. One of the biggest mistakes and budget breakers is buying a bigger home than you can afford. You can’t just look at the monthly financing payments, you have to take the carrying costs into consideration too – maintenance on a bigger house, increased home insurance, property tax and utilities to mention a few.
In other words, do your own research, before buying anything. Don’t rely solely on the advice of one, but many. Which brings me to my next point.
2. Shopping without a list
How many times have you walked into a store only planning to buy one thing, and next thing you know, you have a full shopping cart? From grocery shopping to shopping for clothes, shopping with a list can do wonders to curb your spending appetite or at least help you think twice about your purchases and resist the urge to buy anything, just because it has a sale sticker on it.
Everyone has their ‘danger’ store – that is, a store that they can’t go in without dropping quite a bit of cash. It’s easy to say avoid them altogether, but if it’s a store your regularly shop at for stuff that you regularly need, next time, do yourself a favour and bring a list of items you’re planning to buy. Whether written on a piece of paper or with a handy app like Wunderlist, stop wandering the aisles and start wandering your list.
3. Eating out too often
The food category is one of the biggest budgeting categories for many. Dining out once and while is perfectly OK. But making dining out / ordering in a habit, can be quite expensive (not to mention the effects on your health).
A survey by Visa Canada found 60 percent of Canadians spend somewhere between $7 to $13 on lunch, each time they go out. Three times a week, that quickly adds up to between $1000 and $2000 a year, and just on lunch. Dinners are even more so. Just as an example, we had some company over on the weekend and an order of two large pizzas ran us $33 plus tips. We usually make our own for under $5 per pizza with all the toppings! Mind you, if you’re dining in a restaurant, most entrees for one person alone can amount to that much.
There are lots of ways to make both lunch and dinners both inexpensive, easy and interesting. For loads of great user-submitted recipes that you can make at home, check out Allrecipes.com, or browse through some of the fun cheap meals at 5dollardinners.com.
4. Bad habits
Bad habits like smoking and drinking are tough to kick. But sometimes even what you consider a casual smoke or drink can put you in a serious financial pickle. According to a 2011 study by the Smoking and Health Action Foundation, the average pre-tax price for a carton of 200 cigarettes in Canada is approximately in the range of $80 to $115. A pack usually contains about 20 cigarettes, which is about 10 packs per carton.
I know many smokers who easily blow through a pack a day. Which could quickly add up to $2848 a year! Even half that and you’re spending $1424/yr just on smokes. Smokers also pay higher insurance premiums. And those costs are pre-tax estimates. Both alcohol and cigarettes are heavily taxed. Hitting the club or pub with friends and for a few drinks, might not seem like that big a deal, and in most cases, it isn’t, but on a regular basis and all these things add up quickly. Just five drinks over the span of a week at $5 each is $1300/yr.
Those are quite healthy sums for some unhealthy habits.
We’re all a little guilty of this one. There are many things that we put off that end up costing us in the end. Not taking that extra two minutes to walk to your own bank ATM, so you don’t get swiped with a $3 fee every time you use it. Continuing to pay for services you don’t use or plan to use. Ignoring bills, especially credit card ones can put you in the hole really fast. Putting off investing and not taking advantage of benefits when they’re offered to you – such as defined contribution retirement plans or 401(k)’s. Or not setting a budget at all.
Nowadays, there’s really no excuse, when all of these processes can be easily automated. Saying ‘I’ll get to it later’ is easy. But dealing with it today is better in the long run. And it doesn’t have to be that hard. Set a plan and automate it!