3 Simple Fixes for When You Break Your Household Budget

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Americans have gotten a lot smarter at staying within their budgets lately: Levels of personal debt are at seven-year lows, according to the New York Federal Reserve. But even the most financially prepared households run into money troubles from time to time, and once you've been hit by one budget-buster, it can be easier fall victim to temptation and give up trying to keep control of your finances.

The smarter response, however, is to acknowledge that even the best-laid financial plans can go awry. With some simple fixes, you can get past a budget blowout and get your money management back on track. Here are three things to consider the next time you go over your budget.

1. Give Yourself a Buffer When You're Starting Out

Budgets are challenging not just because they force you to spend within your means but also because they make you identify the exact areas where your money goes every month. When you first start out budgeting, people often find that what they think they spend on certain categories is actually quite different from what they actually spend.

Until you get more familiar with your spending patterns, the simplest thing to do is to build in a buffer category in your budget that you can use for overspending. When you overspend in one category, simply transfer money from the buffer into that category. Each month, your estimates will get better, and eventually, you'll be able to reduce or phase out that extra category entirely. But even though it will mean less money specifically allotted to other needs at first, having that buffer category will save you from the much more difficult task of figuring out which more-specific spending categories have room for trimming.

2. Use Your Most Flexible Budget Categories to Bail Yourself Out.

Some budget categories are more flexible than others. For instance, most people have a fixed rental or mortgage payment, and there's nothing you can or should do when it comes to that budget line. Similarly, although regular bills like cellphone service and utility charges can vary slightly from month to month, as well as by larger amounts on a seasonal basis, you can generally make a pretty close guess based on past experience what those bills will be.

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In areas like entertainment, eating out, and clothing, on other hand, you have plenty of latitude in deciding how much to spend in a given month. So if you go on a big splurge, then replacing a few restaurant meals with cooking at home, or seeing a movie instead of a more expensive concert or sporting event can help you get back in balance for the month.

3. Ask for Help Quickly

Many people panic if they get temporarily behind on their bills. But asking for a bit of forbearance from your creditors works more often than most people expect, and by doing so, you can often reprioritize your bills in a way that will put you back on course to full financial health with a lot less stress.

For instance, many people immediately leap for quick money sources like credit-card cash advances or payday loans whenever they get behind with a bill, incurring huge up-front fees and starting a high-interest clock that can be very hard to stop. Instead, try to negotiate with landlords, utilities, and other regular bills to see if they'll let you make a short-term payment plan that eases some of the pressure. If by doing so, you can avoid late fees and finance charges, you'll save yourself the added burden of figuring out how to cover those extra costs and get yourself back in shape a whole lot faster.

Don't Give Up!

Budgeting is hard to start and even harder to stick with, but the rewards of success will last a lifetime. Following these simple ideas can help you stay on target and reap all the benefits that consistent budgeting can offer.

You can follow Motley Fool contributor Dan Caplinger on Twitter @DanCaplinger or on Google+.

3 Simple Fixes for When You Break Your Household Budget

"My husband told me he'd heard about this book, ["America's Cheapest Family Gets You Right on the Money]," she said. "We talked about it over the phone and I read it and thought how it could apply to us."

The couple had a single savings goal in mind –– scraping together $30,000 for a downpayment on their home in their native Henderson, Nevada.

The mindless spending was out, and Wagasky came up with a budget she could make work.
"I changed the way I was grocery shopping and started working my way up, " she said.

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Wagasky barely knew her way around a kitchen when she started her money makeover.

Now she's an avid cookbook collector (she checks them out from libraries or asks for them as gifts to save), and it's one of the simplest ways she's managed to cutback on spending.

With a $7 bread-maker she scored at a local thrift shop, she never spends on store bought slices. She's not shy about professing her love for wholesale stores like Costco, which is her go-to source for baking ingredients.

Above Wagasky's twist on homemade Sloppy Joe's.

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"Everything must be budgeted," Wagasky wrote in a June entry on her blog. "From family outings, to toiletries to clothes purchases. It must be budgeted."

And she takes Do-It-Yourself to the extreme. Everything from laundry soap and clothing to the kitchen her husband installed in their new home was either crafted by hand or thrifted.
She swears by this home-made laundry detergent recipe. (pictured above)

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When it come to cutting costs, cable was as easy luxury to part ways with.

With two children aged 6 and 8 to entertain, Wagasky invests $14.99 in a Netflix plan and recently added Hulu to the mix.

The family also uses a simple antennae to pick up basic cable channels.

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With a single source of fixed income, there's no room for impulse purchases in the Wagasky household.

They budget $400 for groceries each month and that's it.

"Once that $400 is gone, it is gone," she writes. "There are no extra shopping trips made because there is no more money."

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Wagasky said they have no credit debt, but they do charge emergency expenses on plastic when absolutely necessary.

"We recently had some medical bills we had to pay, and we were able to take our savings and pay those down as fast as we could," she said.

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With gas prices creeping higher each all the time, the Wagaskys watch their mileage like hawks.

That means combining errands together and doing all they can to make one take of gas last a month.

"We know we don't get to drive and visit family often, so when we do we cherish it," she wrote in a blog entry.

"We don't go just for an hour, we stay and visit and even run errands that may be close to where we have family. We try to remember that when the gas is gone...it is gone."

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After Wagasky's husband left active duty and started school, the couple knew they would only have $14,000 per year to live on.

So they paid off the $8,000 he owed on his truck while he was earning more and they could afford the expense.

They also bought a van, which they saved $10,000 for initially and were able to pay the remaining $12,000 owed within a year.

Having zero car payments is a nice relief.

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Like anyone with simple math skills, Wagasky was quick to realize how much cash she was wasting on prepackaged snacks for her children.

She cut them out completely and whips up homemade granola bars and trail mix instead.

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If you're on a tight food budget, your freezer will become your best friend.

Wagasky chops vegetables and fruits and freezes them for a month. She actually does the same for dairy products like cheese, butter and yogurt.

"I am able to freeze about 8 gallons of milk each month," she writes. "They sit at the bottom of my freezer and we thaw them out when we need them." Baked goods get the same chilly treatment.

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Wagasky was dubious about joining a food co-op, but after three months, she realized she would never beat the savings or quality she found.

Food co-ops pool membership fees together in order to fund a monthly harvest that's distributed at designated pick-up points.

A couple of times per month, Wagasky gets a basketful of in-season produce for $15 –– way better bargain than she'd ever find in stores.

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By the time Wagasky's husband came home from Iraq, they had managed to scrape together the $30,000 they needed for a downpayment on a home.

"But we decided the best option would be not to have a mortgage payment at all," she said. "We found a fixer-upper that didn't have a kitchen ... and we paid cash."

Price tag: $28,000. With the leftover cash, they were able to finish the kitchen and install wood flooring throughout the house.

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