Despite the best laid plans of mice and men, there are times when the unforeseeable just waltzes into your life and poops on your budget. Sure you have a budget of $400 a month for groceries. But then:
- Your brother and sister-in-law and their four kids came for a week.
- Or when you least expect it, your best friend announces she's getting married and you have to find a way to pay for a $200 dress.
- Or you find out your kid is failing math and the only way to pull his butt out of the fire is with a tutor that'll cost you $60 a week.
Friends and family can be your worst enemies when it comes to staying on a budget. It can be a real struggle not giving into to the pressure to go out for dinner, see a movie, or come to a shopping-party where you'll be expected to lay out some dough. They aren't trying to mess up your budget, they just want to have fun. And it can be frustrating to watch your pals say they've trimmed their budgets even as they head out for a day of mall grazing.
The Curveball Account
One of the best ways to cope with life's constant financial challenges is to have a Curveball Account. This isn't your emergency fund, which you need for major disasters. This is just a slush fund from which you can draw when unexpected expenses come whizzing at you at 60 miles an hour and you don't want to throw your budget totally off track. Whether you deposit a little or a lot into this account every month, it can be a real budget-saver.
And if you move all the money you “save” by shopping smartly into this account right after you haven't spent it, it'll grow even faster. So the next time you save 50¢ on a coupon, go home and drop that 50¢ into an “I'm-a-Smart-Shopper Jar” and then deposit all those savings to your Curveball Account at the end of the month.
If your slip is minor, you can always cut back on something else in the short-term to get things back on track. So that'll be less coffee or you'll take a pass on a night out with the boy so you can rebalance. But if the expense is a whopper — a major car repair when you simply haven't accumulated enough in your car-repair account — you may have to borrow from your emergency fund to pay the bill. Then you'll have to trim your spending throughout your budget so you can crank up the automatic transfers to your emergency fund to get it back to where it was.
Over-spending may mean you'll have to balance by under-spending: All those things you routinely buy each day may have to go. Here are some other ways to compensate for over-spending:
- No Spend Days are becoming increasingly popular among the frugal set as a way to focus on where the money is going by eliminating the automatic itch to spend. Assigning one day a week as a no-spend day may wake you up to all the ways money disappears, while shoring up your bank account.
- Use those points you've accumulated on your loyalty cards for things that you would normally have to buy so you can use that money to start or boost your Curveball Account. Airmile points can be redeemed by grocery coupons. Use the coupons for grocery shopping and use your grocery money to boost your Curveball Account.
- Give up a vice for one month: no wine, no beer, no ciggies, no candy-bars, no potato chips, no __________________ (insert your weakness here). Once you have the $75, $150, $500 you think you need in your Curveball account, you can go back to your vice if you really want to.
- Sell something. Y'know that sewing machine you never use, that guitar you never play, that exercise bike you never ride? Wouldn't you rather have the money in a Curveball Account so you're not twisted in knots every time something unexpected comes at you? Have a garage sale, take your stuff to a consignment shop, sell it on e-bay or Craigslist. Bank the money.
Your turn: How do you keep your budget flexible while keeping it on track?
Author: Gail Vaz-Oxlade
Gail Vaz-Oxlade is the host of the popular Til Debt Do U$ Part on CNBC. Gail is a columnist for MoneySense, Chatelaine, and Zoomer Magazine and blogs daily at her website, where she also offers terrific tools people can use to dig themselves out of the hole. Gail's latest book is Debt-Free Forever.