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Budgets are only as good as your ability to follow them. Some habits can act like frequent budget busters, draining away valuable income and leaving you wondering where all your money went.
Consumer finance and shopping experts explained how to spot and cut the biggest budget busters in your spending routine.
Falling Into Lifestyle Creep
A common way to bust your budget is to fall into lifestyle creep, where you start spending more as your income increases, according to Andrea Woroch, consumer and money-saving expert at Andrea Woroch. “This can trap you into a paycheck-to-paycheck cycle, cause you to take on debt and keep you from reaching various goals,” she said.
Falling for FOMO
Similarly, FOMO (fear of missing out) can also lead to unnecessary spending, and social media is rife with this. Woroch cited a Bread Financial study that found that 62% of younger consumers admit to spending unnecessary money to keep up with trends they see online and 79% say social media influences their guilty-pleasure purchases.
“It’s important to understand how social media influences your spending decisions and avoid unnecessary spending,” she said. She recommended unfollowing anyone who influences excessive purchases and deleting payment information stored on Instagram and other social media platforms.
FOMO can also exist among friends and family who are spending on a pricey activity or dining out. “If that’s the case, politely decline and come up with alternative and less costly plan to spend time with friends or family,” Woroch advised.
Paying High Interest on a Revolving Balance
If you’re using credit with the idea that you’ll pay it off “someday” but not getting ahead, you’re in danger of racking up high balances with high interest fees, Woroch pointed out. “As interest fees add up, it will feel impossible to pay down your balance and those useless fees can bust your budget and keep you from reaching your financial goals.”
If you have good credit, however, you may be able to get ahead of your debt by using a balance-transfer card, which offers zero interest on the debt you transfer for a year or more. She recommended comparing balance transfer cards at reputable sites and looking for the option with the longest no-interest term period.
Spaving
If you’ve ever bought something just because it’s on sale or spent more to get a bigger discount, you’ve fallen for a common retail trap called “spaving,” Woroch explained. “Those who don’t manage this unnecessary spending will bust their budget quickly.”
To nip this bad spending habit quickly, identify triggers that lead to impulse purchases, she said. For example, if you can’t resist a sale, delete shopping apps on your phone and unsubscribe from e-newsletters. Use unroll.me for mass unsubscribes.
Paying For Services You Don’t Use
Another budget buster is autopay, in which you might trade convenience for wasteful spending if you aren’t paying attention to your recurring bills, Woroch said. She shared that as many as 42% of consumers pay for a subscription service they forgot about and don’t use.
“Scrutinize your monthly expenses and cancel any services you don’t need,” Woroch said. This could mean getting rid of extra movie channels in your cable plan, downgrading your data plan and nixing some video streaming services in favor of free digital streaming through your local library. “Use apps like Trim to manage subscriptions better.”
Low Costs That Add Up
Purchases at Dollar Tree or other budget stores may seem like a deal at the time, but according to Judy Ta, a business, career and financial coach as well as the host of the podcast “Munchies and Money Moves,” even low-cost items that are purchased frequently add up.
“I’ve met tons of people who think ‘it’s only a few dollars’ but this just perpetuates a habit and behavior where you don’t understand the cumulative effect or impact until it’s too late,” Ta said.
Make Slow Changes
Acknowledging that you need to change your habits is often the hardest step. “People often already know the answer but don’t understand how to go about it,” Ta said. “They feel like they have to give up cold turkey but they don’t. They just need to start somewhere and create small habits that will add up over time.”
She doesn’t recommend you quit your spending “cold turkey,” because all-or-nothing changes don’t tend to stick. Instead, start with “mindset and reflection exercises” where you pay attention to your spending habits and why you’re buying things. Then institute regular, slow changes.
