Money Leaks & Budget Killers
Have you ever been in line at the grocery store and grabbed a candy bar from the impulse purchase section? Or, have you gone to Amazon to browse around and within a few clicks you’ve just spent over $100? This has happened to all of us. All too often these little things can add up to big trouble for your monthly budget.
These types of purchases are referred to as “money leaks” and “budget killers.” If not closely monitored, they can end up costing you a whole lot more in the long run.
It’s easy to avoid large, extravagant purchases like dream vacations or the fully loaded luxury car, but small everyday spending adds up over time. If you’ve ever said, “Where did all my money go?” keep reading to learn how you can plug up the money leaks and stop the budget killers in your spending.
Money Leaks & Budget Killers Defined
Money leaks can really be anything you spend money on that you cannot easily identify. These are purchases that even after reviewing bank or credit card statements leave you puzzled about where all the money went.
Take the candy bar previously mentioned; it is just one small item on your overall grocery purchase. As soon as the sugar rush it provided is gone, you will probably forget you bought it. Not to mention the magazine, ice cream, or variety of other things you bought, but didn’t really need. And what about that cash you withdrew from the ATM for dinner one night and then later had no idea why there was a $100 ATM withdrawal on your bank statement?
Browsing on Amazon, making impulse purchases, is a perfect example of a budget killer. Here are a few other examples of budget killers that are easy to avoid, but combined with money leaks can really put you in a financial bind.
Paying Fees: If you’ve ever overspent in your checking account and been hit with multiple Non-Sufficient Funds fees, you understand how this can be a budget killer. If you know you will run close to zero in your account each month, pay close attention to these fees when choosing a bank. Another fee you can avoid is paying a monthly maintenance fee for your checking account. Most large banks make you maintain a certain balance or complete specific types of transactions to waive a monthly maintenance fee while local community banks offer several account options with no monthly maintenance fees. Learn more about the personal accounts offered by Peoples Bank of Alabama.
Unneeded Subscriptions: In today’s subscription based world, it’s easy to sign up for $2.99 a month here and $9.99 a month there… it’s only $10 right? Well, if you aren’t using that subscription or if you have several, they can add up quickly and kill your budget.
Payday Loans: Getting quick cash from a payday lender may seem like your only option in a time of need, however if you aren’t careful, that one time need may turn into months if not years of financial pain. With high fees and typically 2 week terms, a pay day loan may have an average APR of 391%*. A $500 payday loan could end up costing you far more than it should and may not just kill your budget, but destroy it. Thankfully there is a better option for Peoples Bank of Alabama customers called CashPlease. If you think this may be something that can help you, click here to learn more.
Credit Card Interest: While credit cards provide a convenient way to make purchases and other benefits, not paying them off by the due date can create some significant extra interest expenses. Use them wisely to keep from breaking your budget.
Premium Packages: Whether its cable TV, internet or the large size combo meal at the local fast food restaurant, it seems like more and more places are offering a top of the line “premium” package. We’ve all heard, “For just a few dollars more, you get…” Be sure you need or at least will use all that is offered in the premium package before start you paying for it.
How do I Improve
It all begins with knowing exactly where you are spending your money. If you are leaking money all over the place and have no idea what you’ve bought, there is a serious problem. Famed financial guru, Dave Ramsey, says you’ve got to give every dollar a name. To do this, you must have a monthly budget.
Budgeting 101
To effectively budget you must know exactly how much income you have each month and then expenses, savings and giving must equal this number at the end of the month. There are many resources available to guide you through the budgeting process. Here at Peoples Bank we offer personal money management software, at no cost to our customers designed to help you keep track of your spending. It allows you to set a budget and then link in all your bank, credit card and investment accounts so that you get a full picture of your financial outlook.
After you’ve established a budget, STICK to it and talk about it often with your spouse and/or children. Create a safe and secure atmosphere for family accountability so that everyone is working together towards a common goal. Maybe it’s a new family car, a dream vacation or establishing an emergency savings funds, you need a goal to work towards as a family. Along the way help your spouse or kids understand that saving today, allows more opportunity tomorrow.
Preventing money leaks and budget killers is not as hard as you think, but it does take discipline and a little effort from everyone in your family. If you need more help, speak with a local Peoples Bank of Alabama banker.
*Generic payday advance provider credit terms are sourced from a Community Financial Services Association of America (CFSAA) report entitled Payday Advance: A Cost Comparison of the Alternatives. Terms depicted assume (i) credit principal at a cost of $15 per $100, a 14 day loan term, and repayment by balloon payment upon maturity; (ii) twelve "rollovers" of an initial payday advance to sustain the $500 principal for 180 days; and (iii) each "rollover" requires a new $75 payday advance fee. Stated APR is taken directly from the CFSAA report and contemplates a single 14 day payday advance loan.