Tuesday, July 10, 2012

Perfectly Practical #118 - Knowing Your Budget Busters

The lovely Cricket from Thrifty Texas Penny and I did a class not too long ago entitled "Budget Busters and How to Avoid Them."

 
One of the most impractical ways to start on a frugal living journey is to scrimp and save while continuing on with the "budget busters" on your ledger sheet. 

 
What is a budget buster?  I would say that it is any unnecessary expense that causes strain or holds you back from making progress on your finances. 

 
The first step in any process is to evaluate your particular situation and identify your budget busters.  We've all got them; those little (or big) habits or toys - all those "must haves" in our lives that fall into one of three budget busting categories:  Active, Passive, or Inactive.

 
Active Budget Busters - These are the little habits that we choose to continue. We have to actively decide each time money is spent on the particular item.  Examples are:

  • Drinks at a restaurant instead of ordering water
  • Running through a drive thru for a drink
  • Going out to eat because dinner wasn't planned in advance
  • Making multiple car trips instead of consolidating them
  • Shopping the dollar aisle because it is "just a dollar"

 
Passive Budget Busters - These are the purchases that we have already made an initial investment in but don't think about the ongoing expenses attached to them like taxes, upkeep, licenses, insurances, dock fees, inspections, etc.  Such as:

  • Bass Boat
  • Deer Lease
  • Third Vehicle
  • Time Share
  • Lake House

 
Inactive Budget Busters - These are items that aren't necessarily costing you money but are taking up space and collecting dust whereas you could sell them to pay off debt.  As in:

  • Inherited Collectibles (antiques, jewelry, silver, china, crystal, coins)
  • Childhood Collections (dolls, stuffed animals, figurines, baseball cards)

 
It could be that your budget buster is a hemorrhage or a slow leak but either way it is costing you money and by identifying them, you can reverse any further damage to your financial future.

 
This is part of Works for Me Wednesday.

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