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If you’ve read this far into Zero Debt, I have to assume that you’re not just a casual reader – you’ve likely had your fair share of money woes. Well, I’m a firm believer that when most people experience cash-flow problems with their budgets, it’s usually caused by one of two things:
Causes of Cash Flow Problems
1) You Don’t Have A Budget …. Or
2) You Do Have A Budget … But … It gets blown by that dirty, rotten S.C.U.M.
What is SCUM? Let me tell you right away that it’s not: “Some Cousin, Uncle or Mama” – although you may feel like certain relatives are draining you financially!
Fill in the blanks below … SCUM actually stands for “Something Came Up Monthly.”
S ____________________________
C ____________________________
U ____________________________
M____________________________
How many times have you thought you were getting ahead on your bills, only to have something “come up” that you didn’t anticipate? It could be that you loan money to a friend in need; someone in the family gets sick; your kid’s school has a fund-raising drive – whatever. The end result is always the same: some unexpected expense fouls up your budget.
Now for some people, the real problem is that they’ve never truly created a written budget at all. They just spend willy-nilly and hope that checks don’t bounce.
But even those people who actually do make plans seem to constantly blow their budgets.
4 Simple Steps to Stop Blowing Your Budget
In fact, each month, millions of Americans dutifully plan their household budgets – only to have some unforeseen event come along and totally wreck what are seemingly well-made financial plans.
If you ask most of these people how their budgets went awry, the response will almost invariably be: “Something came up,” followed by an explanation about how their house roof leaked, their car conked out, or someone in the family unexpectedly took ill.
While unanticipated situations can certainly spoil even the best-laid economic plans, why is it that many individuals blow their budgets month after month after month? In my many years of talking to consumers, financial counselors and money management experts, I’ve come to the conclusion that true “emergencies” – like those described above – actually happen relatively infrequently. So while most people think they run out of money because some emergency “came up,” the reality is that most people blow their budgets because LIFE happened to them.
LIFE is an acronym that describes the four ways that your budget gets out of whack – forcing you to spend more than you planned for the month, or causing you to live from paycheck to paycheck.
- Listed items are under-calculated.The “L” in LIFE stands for expenses that are “Listed” items in your budget, but your numbers are actually way off the mark. Unfortunately, many individuals who draw up budgets don’t use very precise numbers. People have a tendency to underestimate their spending. Take cellular phones, for example. If you own one, you probably account for it in your monthly budget with a figure like $49.99 – or whatever your basic monthly charge happens to be. But do you find that you regularly talk beyond your allotted cell phone minutes, so that you wind up with a mobile phone bill closer to $80 per month? If so, you need to adjust your budget and put in more realistic numbers for this expense. Household bills, like electricity and gas, are another area where people get tripped up. They include these expenses as a flat cost in their budgets, say $100 a month. But their heating or air conditioning bill is routinely far more than that $100, especially during times of extreme weather.
- Impulse purchases seduce you.We all make impulse purchases from time to time – but some people do it on a regular basis. It may be that you’re reading the newspaper and you see a discount coupon for a retail store you like. And before long, you’re at the mall, shopping. Other times, you may be surfing the Internet looking for information, when a pop-up seduces you with some intriguing advertisement. Next thing you know, you’ve whipped out your credit card to buy some product or service.
- Forgotten bills surface.Some bills get paid annually or perhaps twice a year. If you’re not careful in your planning, you can exclude these expenses from your budget, and then, when the bills come due, you realize you forgot all about them. Has this ever happened to you? If so, don’t omit from your budget those expenditures that may not be paid on a monthly basis – things like your homeowner’s or auto insurance, the maintenance fee for the vacation time share you own, your gym membership, or any annual fees you pay to belong to personal, professional or civic organizations.
- Emergency or unexpected events occur.Last, there are obviously times when emergencies – like a burst boiler unit – can ruin a budget. Try to minimize these events with preventative measures, such as regularly servicing your boiler, having routine maintenance done on your car to avoid breakdowns, and making periodic visits to the doctor to stave off serious medical conditions.
Once you realize that LIFE happens to everyone, you can take some steps to safeguard your budget. Start by reviewing your finances and taking a hard, realistic look at your overall spending habits. If you’ve been vastly under-calculating listed items in your budget, make the necessary adjustments. If you make too many impulse purchases, carry less cash with you or put your credit cards away, to minimize the temptation to buy on a whim. Fine-tune your budget so you don’t forget any one-off bills. Also, consider what you can do to reduce those “emergency” situations – especially the kind that can be cured with a little preventive medicine. Finally, think very hard about your own budget busters.
L isted items were under-calculated
Impulse buying
Forgotten bills
Emergencies or unexpected expenses
Now list some of your budget busters below. Place a letter – L, I, F, or E – next to each one. Do you see any patterns? What are your budget busters?
What are your budget busters?
L I F E
1. _____________________________________________
2. _____________________________________________
3. _____________________________________________
4. _____________________________________________
Next- Day 18: Find 10 Ways to Cut Your Spending
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