In everyone’s financial life, there are a few things they can count on. One of which is that they will experience some type of budget buster. Some are more serious than others, but most of them can be prevented, or at least the damage can be minimized.

When you are trying to set up a budget or you are trying to find additional money in your budget, it can be difficult to cut certain items. You may feel like the things listed are a must-have for you to get by. You can develop bad financial habits that hurt you in the long run.

• What are the Most Common Budget Busters?
• What are some Expenses that can Cause Damage and how to Avoid?
• What does it mean to be on a Budget?
• What are the Uses of a Budget?
• What are Living Expenses?
• What if I Don’t Make Enough to Cover All Living Expenses?
• How Much of My Income Should I Spend on Living Expenses?

What are the Most Common Budget Busters?

These 10 items are ones that many people have a hard time cutting. Learn cheaper alternatives that will help you save money while still enjoying some of the things that are most important to you. You may want to do some of these things with all of the extra money you save. 

1. Cable Television

With subscription prices between $60 to $100 or more a month, cable television can be a big budget-buster. Canceling your cable television bill can help you save a significant amount of money each year. You can save between $720 and $1200 each year by simply canceling your cable.

Read Also: Budgeting on a Fluctuating Income

If you still want access to the latest television shows, try Hulu or a similar service to watch the shows over the Internet. This is an easy cut, and once you cancel cable, you may find that you do not miss it at all.

2. New Car Payments

Paying off your car can free up a lot of cash in your budget, but sometimes you do need to borrow money to get a car. One way to save is to buy used. Shop for a deal and you can keep your car payments lower and more manageable. In the meantime start putting some money away each month to pay for your next car purchase. If you do this, you will find that you can save money on the interest for the car loan.

3. Eating Out

Eating out can add up quickly. If you enjoy eating out because you love really good freshly prepared food, you can save money by learning to cook the items yourself. If you eat out because you are strapped for time, try cooking over the weekend and making your own freezer meals. You can stop eating out and save a lot of money. It is easy to save more than $50 a week if you stop eating out if you are single and even more if you are married or have children.

4. Gym Memberships

Gym memberships can be pricey, especially if you are locked into a contract. Some gym memberships are more reasonably priced than others. If you really need a gym to exercise in, you can look into using a recreation center through your city, check out the facilities at your apartment complex or look for a less expensive gym with a low monthly membership fee. You can also try exercising at home or jogging in your neighborhood.

5. Huge Gifts

The holidays and birthdays can get very expensive. If you come from a family that expects you to give gifts to every family member, it can add up quickly. You can scale back on the gifts and try to give homemade gifts or shop throughout the year to find sales. You may also want to talk to your family about drawing names at Christmas time. The alternative is to find less expensive gifts by shopping throughout the year.

6. Expensive Vacations

Vacations are a lot of fun, but if you have a lot of debt or you are struggling to make ends meet, you should not spend a ton of money on vacations each year. You can plan smaller less expensive vacations like camping or to destinations you can reach by car.

If you have a dream vacation save up for it, and pay for it with cash. If you are debt-free and saving towards retirement, you can take the types of vacations you want to, just make sure you pay cash for it. ​

7. Living In a Place You Can’t Afford

When you are paying more than about 25 percent of your salary to your mortgage or your rent each month, it can be crippling when you try to manage paying all of your other bills. Before you take out a mortgage work up a budget. You need to carefully determine how much home you can afford, instead of just taking whatever the bank is willing to lend to you.

It is better to buy a less expensive home that you can afford than your dream home that you end up defaulting on. When you live in a high cost of living area, your rent may also be really expensive. You can reduce this by having a roommate or living a bit further out of town.

8. Entertainment Costs

Entertainment costs can add up quickly whether you are a big sports fan, video gamer, or you love to go the opera. This is an area that you need to be willing to cut back on when you are in debt or times are tight. Ask family members to give you gift cards for tickets or games instead of presents, and reduce the amount you spend instead of cutting out altogether.

Instead of going to every home game, just go to one this year, and watch the rest at home. Or you can buy just one video game every few months and rent the other ones. You should be able to save money on this. You may want to try to find frugal activities that do not cost a lot to do. 

9. Shopping Habits

Your shopping habits really affect the way that you spend money. One of the biggest things you can do is to reduce how often you are in a store. This goes for everything from clothes shopping to grocery shopping. Try to do one major trip every week for groceries and always shop with a grocery list.

Try to limit your other shopping trips and if you do not have money to buy an item, do not go into the store looking for it. Another trick is to switch to cash for these budget items. You can make this work by leaving your debit and credit cards at home.

10. Emergencies

An unexpected medical bill or a car repair can bust anyone’s budget. The best way to fix this is to set up an emergency fund to cover these unexpected expenses. Additionally, if you include money for car repairs or medical costs in your budget, and allow unused money to roll over each month, you will build up sinking funds to cover the costs of these expenses over time. Planning can help you handle the costs of emergencies.​

What are some Expenses that can Cause Damage and how to Avoid?

Here are expenses that can cause major financial damage:

1. App Purchases

Chances are, you’ve got a smartphone. If it keeps you company when waiting in the doctor’s office or acts as entertainment for the kids in the car, you’ve probably purchased more than your fair share of music and apps. But have you ever planned for app purchases in your budget? While it’s true that $1.99 here and $3.99 there doesn’t seem like a big deal, it all adds up.

Solution: Download free versions of apps, and turn off the “In-App Purchases” option on your phone, which can protect you from being charged when you upgrade to a new version of an app you’ve already bought. Or, if you’re really dying to make a purchase, add up your iTunes or Google Checkout emails for the month and include it in your budget to keep you on track.

2. School Fees

Between tuition, book orders, and supplies, school can continue to be a drain on your finances, even after back-to-school shopping is over. Since no one wants their kids to be left out of fun events and activities, chances are you’ll end up writing checks and sending cash more often than not.

Solution: Add a line in your budget for school fees. Of course, it’s a floating cost, since some months you’ll pay out more than others. Just assess the fees you pay in one month and use that as a gauge for future budgeting. If you don’t have the money, learn to say no to the PTA, or offer your services instead of your money.

3. Charitable Donations

Many people have already budgeted for annual donations made to their church, community, or favorite charity. But what about the charities you donate to at the cash register in the grocery store, or the money you flip into a charity bucket as you leave the mall? Those expenditures can add up. While you may feel guilty when a cashier asks, “Would you like to donate $5 to charity?” it’s okay to say no.

Solution: Decide how much you can afford to give to charities and stick to it. If you set your monthly budget at $10, you can say “yes” to a dollar here or a dollar there without spending over your limit.

4. Flash Sales

If you’re one of the millions of people who get flash sale notifications from daily deal websites, you know the adrenaline rush that follows. A deep discount and limited quantities? It’s practically a recipe for whipping out your wallet and overspending on stuff you probably don’t need. Sure, flash sales and daily deals offer great discounts – but can you afford them?

Solution: Unsubscribe from your daily deal emails and only surf their flash sale sites when you’ve got fun money in the budget. Having emails sent to you daily is way too tempting.

5. Bank Fees

When was the last time you added a line for bank fees in your budget? Unfortunately, there’s a good chance you’ve never noticed them, since maintenance fees, overdraft fees, and annual fees are automatically deducted from your bank account without your consent. The result is checking your account balance and wondering where your perfectly budgeted money has gone.

Solution: Swap your current account for no-monthly-fee bank accounts, offered through banks and credit unions across the country.

6. Expired Perks

Whether it’s your cable company offering six months of “free” movie channels or your favorite magazine offering a trial subscription, failing to cancel these accounts after the promotion ends can cost big bucks. Many companies put your account on auto-pay, which means once your trial period is over, your account is instantly charged for the remainder of the contract or year.

Solution: It’s okay to take the perks – just be certain you know when they expire. Set a notification on your phone for the day the perks expire so you’ll remember to call and cancel. Or, if you don’t want the channels, see if you can negotiate for a credit on your account for a few months instead.

7. Movie Rentals and Streaming

Renting a movie is usually touted as a low-cost entertainment option. Although it saves you from paying for expensive movie theater tickets and concessions, failing to return a movie can totally derail your budget. A $1-per-day rental is only a good deal if you return it after one or two days – keeping it for a couple of weeks can really add up.

The same goes for streaming services such as Amazon Prime, Hulu Plus, and Netflix which require you to pay a small fee for new releases. A couple of bucks each weekend shouldn’t go unaccounted for, even though it may seem small.

Solution: Always return your videos on time. You can set a reminder on your phone if you typically forget. Even better, go for cheaper – or free – streaming options.

8. Coffee Breaks

Can’t live without your cup of Joe? The occasional treat of a boutique coffee may be costing you more than you think. A $2 cup of coffee every weekday can cost you up to $520 per year. Plus, once you head into the café, you’re often hit with the smell of pastries and other money-sapping goodies. Before you know it, you’re buying a danish and splurging for an extra shot of caramel in your drink – not great for your wallet or your waistline.

Solution: While budgeting for your coffee breaks can help you control them better, so can staying out of the coffee shop altogether. Bring your own coffee from home, or head to a fast food place for the same type of coffee on the cheap.

What does it mean to be on a Budget?

A budget is an estimation of revenue and expenses over a specified future period of time and is usually compiled and re-evaluated on a periodic basis. Budgets can be made for a person, a group of people, a business, a government, or just about anything else that makes and spends money.

A budget is a microeconomic concept that shows the trade-off made when one good is exchanged for another. In terms of the bottom line—or the end result of this trade-off—a surplus budget means profits are anticipated, a balanced budget means revenues are expected to equal expenses, and a deficit budget means expenses will exceed revenues.

To manage your monthly expenses, prepare for life’s unpredictable events, and be able to afford big-ticket items without going into debt, budgeting is important. Keeping track of how much you earn and spend doesn’t have to be drudgery, doesn’t require you to be good at math, and doesn’t mean you can’t buy the things you want. It just means that you’ll know where your money goes, you’ll have greater control over your finances.

Individuals and families can have budgets, too. Creating and using a budget is not just for those who need to closely monitor their cash flows from month to month because “money is tight.” Almost everyone—even people with large paychecks and plenty of money in the bank—can benefit from budgeting.

Budgeting is a wonderful tool for managing your finances, but many people think it’s not for them. Below is a list of budget myths—the erroneous logic that stops people from keeping track of their finances and allocating money in the best way.

1. I Don’t Need to Budget

Having a handle on your monthly income and expenses allows you to make sure your hard-earned money is being put to its highest and best purpose. For those who enjoy an income that covers all bills with money left over, a budget can help maximize savings and investments.

If one’s monthly expenses typically consume the lion’s share of net income, any budget should focus on identifying and classifying all the expenses that occur during the month, quarter, and year. And for people whose cash flow is tight, it can be crucial for identifying expenses that could be reduced or cut, and minimizing any wasteful interest being paid on credit cards or other debt.

2. I’m Not Good at Math

Thanks to budgeting software, you don’t have to be good at math; you simply have to be able to follow instructions. Many of these programs are free and legitimate. If you know how to use spreadsheet software, you can make your own ledger. It’s as simple as creating one column for your income, another column for your expenses, and then keeping a running tab on the difference between the two.

3. My Job Is Secure

No one’s job is truly safe. If you work for a corporation, being laid off due to downsizing or a takeover always is a possibility. If you work for a small company, it could die with its owner, be bought out, or just fold.

You should always be prepared for a job loss by having at least three months’ worth of living expenses in the bank. It’s easier to accumulate this financial cushion if you know the amount you’re bringing in and spending each month, which can be monitored with a budget.

4. Unemployment Insurance Will Tide Me Over

Unemployment compensation is not a sure thing. Let’s say a bad situation at work leaves you with no choice but to quit your job. Unless you can prove constructive discharge (that is, you were virtually forced to resign), your departure will be considered voluntary, making you ineligible for unemployment insurance. Besides, the benefits may fall well short of the wages you’re used to: for most states, they average between $300 and $500 per week.

5. I Don’t Want to Deprive Myself

Budgeting is not synonymous with spending as little money as possible or making yourself feel guilty about every purchase. The aim of budgeting is to make sure you’re able to save a little each month, ideally at least 10% of your income, or at the very least, to make sure that you aren’t spending more than you earn.

Unless you’re on a very tight budget, you should be able to buy baseball tickets and go out to eat. Tracking your expenses does not change the amount of money you have available to spend every month; it just tells you where that money is going.

6. I Don’t Want Anything Big

If you don’t have any major savings goals (buying a house, starting your own business), it’s hard to drum up the motivation to stash away extra cash each month. However, your situation and your attitudes likely will change over time.

Perhaps you don’t want to save up for a house because you live in New York City and expect that renting will be the most affordable option for the rest of your life. But in five years, you might be sick of the Big Apple and decide to move to rural Vermont. Suddenly, buying a home becomes more affordable and you might wish you had five years’ worth of savings in the bank for a down payment.

7. I Won’t Qualify for Student Financial Aid

Yes, the catch-22 of student financial aid is that the more money you have, the less aid you’ll be eligible for. That’s enough to make anyone wonder if it isn’t better to just spend it all and have no savings in order to qualify for the maximum amount of grants and loans.

But that catch mainly applies to earn income. Whether you are an adult student going back to school or the parent of a student headed to college, the Free Application for Federal Student Aid (FAFSA) form (used for Stafford Loans, Perkins Loans, or Pell Grants), does not require you to report the value of your primary residence (if you own a home) or the value of your retirement accounts.

So if you want to save money without compromising your financial aid eligibility, you can do so by using your savings to buy a house, prepay your mortgage, or contribute more money to your retirement accounts. The savings you put into these assets can still be accessed if you face an emergency, but you won’t be penalized for it.

Even if you employ all the available legal strategies to maximize your financial aid eligibility, you still won’t always qualify for as much aid as you need, so it’s not a bad idea to have your own source of funds to make up for any shortfall.

8. I’m Debt-Free

Good for you! But being debt-free without any savings won’t pay your bills in an emergency. A zero balance can quickly become a negative balance if you don’t have a safety net.

9. I Always Get a Raise or Tax Refund

It’s never a good idea to count on unpredictable sources of income. This may be the year your company may not have enough money to give you a raise or as much of a raise as you’d hoped for. The same is true of bonus money. Tax refunds are more reliable, but this depends in part on how good you are at calculating your own tax liability.

Some people know how to figure how much they’ll get in a refund (or how much they will owe) as well as how to adjust this figure through changes in payroll withholding throughout the year. However, changes in tax deductions, IRS regulations, or other life events can mean a nasty surprise on your tax return.

10. I Just Don’t Have the Discipline

If you’re still not convinced that budgeting is for you, here’s a way to protect yourself from your own spending habits. Set up an automatic transfer from your checking account to a savings account you won’t see (i.e., at a different bank), scheduled to happen right after you get paid.

If you are saving for retirement, you may have the option of contributing a set amount regularly to a 401(k) or other retirement savings plan. This way, you can pay yourself first, have enough money for the transfer, and pay yourself the same predetermined amount that you know will help you meet your savings goals. 

What are the Uses of a Budget?

Everyone wants more money. And yet, with a floundering economy, widespread job loss and high costs of living, people are finding themselves trying to stretch each dollar and pinch each penny. A budget, whether it be for personal or business use, is necessary now more than ever.

You may be surprised at what you learn when you start watching your spending, but that knowledge can also help you reach your financial and personal goals.

1. Track Expenses

It is easy to forget where you spent that extra money last month or realize just how much you are spending on certain expenses. Budgeting allows you to see these facts in black and white. Being able to make financial decisions based on facts rather than memory will help you stay on track and set realistic goals.

Making a spreadsheet and keeping receipts is a good way to manage finances, especially in a company or a household with multiple members who may not communicate about each expenditure.

2. Set Limits

Budgeting allows you to set limits on your spending. A budget helps you determine how much money you should have going out each month based on how much income you have coming in each month.

Seeing where your money goes each month can help you distinguish between fixed expenses, such as housing and food, and non-fixed expenses, such as entertainment. Cut down or eliminate non-fixed expenses, to avoid excess spending. Setting limits on your spending will help you stay accountable for your financial decisions.

3. Reach Goals

Without a budget, you have no way of really knowing where each penny is going each month. Whether you have your sights set on a new house or a car, planning ahead for such expenses can help you reach your goals sooner. Set a timeline in order to buy the item and determine a realistic amount to set aside each month in order to afford it.

4. Build Wealth

Plenty of people become millionaires without a budget, but most will not stay millionaires without one. In order to build personal or business wealth, use a budget to save money. Many financial experts agree that the best way to build wealth and be financially responsible is to eliminate debt, invest as much as you can afford to and live within your means. Budgeting can help you make your money work for you and put you on the road to financial freedom.

What are Living Expenses?

Living expenses are expenditures necessary for basic daily living and maintaining good health. They include the main categories of housing, food, clothing, healthcare, and transportation. Understanding what’s involved in each of these areas will help you to budget for them.

Here’s a complete living expenses list:

Housing: Whether you rent or own, there are regular expenses, including some you may not be aware of.

• Mortgage payment or monthly rent
• Utilities (i.e. electricity, gas, trash removal)
• Insurance (i.e. homeowners or renters)
• Property tax
• General maintenance (i.e. lawn mowing, snow removal)

Food and grocery: Besides your daily meals, consider other living necessities.

• Food and beverages
• Personal care items (i.e. shampoo, toilet paper, bandaids)
• Cleaning supplies

Clothing: From your work clothes to pajamas, ensure you account for everyone in your family.

• Daily clothing
• Formal wear
• Undergarments
• Boots, shoes, and coats

Healthcare: Remember to include expenses for your primary doctor, dentist, and other specialists.

• Insurance premiums
• Office copays
• Pharmacy copays
• Over-the-counter items

Transportation: Depending on whether you take the bus or drive a car, add up your regular transportation costs.

• Car payment
• Car insurance
• Gas
• Public transportation tickets
• Taxi costs
• Parking fees

Miscellaneous: Some living expenses don’t fit a specific category, but still need to be in your budget.

• Cell phone bill
• Internet
• Baby or child necessities

While there are likely other recurring costs in your life, they might not be considered as a living expense. For example, recreational activities and entertainment aren’t living expenses. That means your gym membership and Netflix subscription should be accounted for elsewhere. You’ll also want to ensure your budget includes any debt repayment, such as for a student loan.

What if I Don’t Make Enough to Cover All Living Expenses?

It can be hard to afford the cost of living, especially if you’re in an entry level job or live in an expensive city. Many people — especially those early in their careers — use creative ways to make their budget work.

Here are some easy ways to cut down your living expenses in each major category:

Housing

• Consider having a roommate to split costs
• Reduce your utilities by being mindful of water and electricity consumption
• Move to a smaller, less expensive place

Food and grocery

• Scale back on eating out
• Plan your meals to stretch your food budget
• Limit trips to the coffee shop
• Buy in bulk
• Purchase store brands

Clothing

• Shop at consignment stores or online marketplaces
• Build a capsule wardrobe
• Reduce unnecessary purchases

Healthcare

• Buy over-the-counter or generic brands
• Check to see if your employer offers flex spending or a health savings account

Transportation

• Shop around for a better car insurance rate
• Consider selling your car if you live in a city with great public transportation
• Buy a used car instead of a new one
• Use a gas rewards card
• Try carpooling

Miscellaneous

• Downgrade your cell phone service plan
• Use coupons and coupon codes
• Shop at discount stores

Besides trimming your expenses, consider a side hustle or working a part-time job in your free time. Even working one night a week as a waitress, babysitter or Uber driver can add up to a lot of extra cash. You can also make money online by working as a freelancer or tutor and even completing online surveys.

How Much of My Income Should I Spend on Living Expenses?

Based on your salary and the cost of living in your city, the exact amount you spend on living expenses will vary. How much you spend on rent, for example, is dependent on location and your standard of living. For instance, rent is higher in Los Angeles than it is in Detroit. A three-story home will be more than a one-bedroom apartment. Figuring out your grocery budget will depend on how often you eat out and if you use coupons at the store.

No matter your preferences or where you live, you can come up with a rough estimate for your living expenses. Focus on the main categories of housing, food, clothing, transportation, and healthcare. Look at each component and write down roughly how much you spend in each area.

Read Also: Budgeting a Contingency Fund

In general, experts recommend using the 50/20/30 rule to create your budget, especially if you’re a young adult. The 50/20/30 guideline offers a basic financial strategy for your spending and saving. The rule says that you should spend 50% of your income on your living expenses, like your rent and car payment.

You should put 20% of your income in savings, whether that’s for a rainy day fund or a down payment on a house. For the remaining 30%, put it toward personal expenses like a night out with friends or a weekend getaway.

Because the 50/20/30 rule is a guideline, there is some flexibility. You can adjust the percentages based on your unique circumstances. The main idea is to limit your living expenses to roughly 50% of your income. That way, you’ll have enough leftover for your savings and fun expenditures.

Finally

You can’t predict every little thing that happens throughout the month, but you can prep yourself and your budget for the contingencies. Knowing where you tend to slip up and spend extra money means you can give your budget a little extra padding or plan ahead to avoid those busters that throw you off course.