Oblications, Impulse Spending, & Other Budget Leaks

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Isn’t it funny how you can spend months or even years plotting out the perfect budget and then suddenly one wrench is thrown and the whole thing is blown to smithereens?

Well, not funny really. Actually, it’s incredibly frustrating.

But that’s just how life goes. We plan for our basic needs and maybe even leave room for emergencies and unexpected expenditures. But all it takes is one friend’s wedding, a new “convenience” that’s been released, or some other major change in a loved one’s life to send our budgets into a tailspin. And in a still-slow economy, that tailspin can take years to recover from.

So if all the planning in the world can’t save our budgets from these major life events, what can we do?

What Causes Big Budget Leaks

Ever since The Great Recession, Americans’ spending behavior has been monitored closely by experts everywhere. Are we getting better at saving? Worse with credit card debt? Have we learned our lesson?

If I’m being honest, I have simultaneous (and opposite) reactions to this type of data:

  1. This is good – we need to study our behavior so we can improve it
  2. Are you serious? How are we supposed to get better at our finances if the job market is slow, people have lost their homes, and pay for many industries has declined?

Okay, now that that’s off my chest, let’s talk about the latest in American spending. Time recently released data suggesting that Americans are not faring well in their emergency savings:

“The Financial Security Index from Bankrate.com shows half of American families have no savings or less than three month’s worth of expenses saved for emergencies. The survey’s findings, analysts note, haven’t changed since 2011, when the company first began inquiring about the saving habits of American families.”

In short, 50% of American families have little to no emergency savings – meaning a sudden job loss, illness, or other unexpected event could wreak financial havoc on their lives. Of course, returning to item number 2 above, it’s easy to see why that may be – and it’s not just because we haven’t learned the importance of savings.

Luckily, at least when it comes to emergencies such as job loss or illness, there are other measures available to help: life insurance, medical insurance, and unemployment, to name a few. But while these can certainly provide a buffer in times of need, they often aren’t enough.

Major emergencies like this aren’t the only thing draining our budgets though. There’s a whole different type of budget leak that is much harder to plan for: namely the desire to be supportive to our loved ones. A study in Marketwatch explains more (and coins an interesting new term!):

“According to a survey released Wednesday by travel-booking site Hotwire.com , every year Americans spend $185 billion — nearly $800 per person — just on “leisure” trips they feel obligated to take.

Among the most common trips that fall into the obli-cation category are for birthdays (a total of $32 billion, or $137 per person a year), weddings ($20 billion, or $89 per person a year), reunions ($11 billion, or $50 per person a year) and wedding and baby showers ($7 billion, or $33 per person a year), according to the survey, conducted by Harris Poll, which questioned 2,000 U.S. adults.”

Oblications. After shelling out thousands of dollars for friends’ weddings, baby showers, and the like, this is a term I can really understand. In fact, the first time I was invited to be maid of honor for a friend, here’s what crossed my mind:

This is awesome. My friend is getting married and I get to be a part of it!…. But…if I can’t even afford to eat more than a PB&J at lunch, how am I going to pay for flights, dress, bachelorette party, gifts….

The answer? I just did it. I somehow made it work (sadly relying on a credit card for a few of these expenses) and all was well. But it’s not like I planned for it. I already made my budget for the year and it’s not exactly couth to say, how could he propose to her now? This is such a bad time for me.

And there you have oblications. Vacations and events that you really don’t think you can afford, but that you take part in because, well, what choice do you have? You don’t want to hurt your loved ones. The same goes for all the other factors Marketwatch talks about: birthdays, parties, and so on. Even the seemingly smallest event can cause a huge budgeting problem for months to come.

How to Plug Those Budget Leaks

There’s an easy answer and a not so easy answer to this question. Let’s start with the easy one:

Make Sure Your Monthly Budget Includes a “Leaky Budget” Category
There are no guarantees in life, which means the one thing you can guarantee is surprises. With that said, if you have an emergency fund, you don’t want it to go to expenses like those mentioned above. An emergency fund should be truly for emergencies alone.

But if you create a leaky budget category, you can be sure to be prepared for unexpected fun events such as weddings, birthdays, etc.

Earn Side Income to Fund Your Leaky Budget Category
You can start off by saving a small amount each month – say $25 or so – for this category. But if you know there are some things brewing in the lives of your loved ones, you may want to consider earning some side income so you can funnel more money into that category. (In fact, that’s also a great way to boost your emergency fund.)

Remember, this side job doesn’t have to be a forever thing. You shouldn’t have to work yourself into the ground to support your loved ones’ life events. But if it’s something you can take on for six months or so to build up these budget categories, it could benefit you for years to come.

The Not So Easy Advice….
Here comes the harder piece of advice to execute on – talking to your loved one about your financial situation. If an “oblication” stands to send your bank account into the oblivion, tell your loved one. See if there’s something that you can do to be as supportive as you want to, but without annihilating your finances.

And if there are other people involved, talk to them as well! There’s a good chance that they’re in the same situation as you are (refer to the Time quote above). By taking the lead in the conversation, you could find that everyone feels relieved that someone did. Then you can get a real conversation going about how to find less expensive alternatives to the traditional social expectations.

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Getting Help on Your Budget and Financial Goals

In a recent article about impulse spending and how modern conveniences make it so difficult not to do, The New York Times talks about how there are devices to help us spend, but not to help us save:

“Unfortunately, there isn’t yet a device that makes it easy to say, ‘I’m better off NOT buying something.’ At the moment, all we have to rely on is who we see in the mirror, and maybe a better-behaved partner.”

Luckily, that’s not entirely true! As Americans are working harder to improve their financial situations, so too are new startups and companies to help them do so. For example, ReadyForZero helps keep you motivated to pay off your debt (and shows you how to do it), Mint teaches you how to budget (and their mobile app allows you to track spending as it happens), and Betterment allows you to automate your investing so you can watch your savings grow without being an investment expert. With the help of these websites and their mobile apps, you can find a way to stay motivated and empowered to save – even if you’re just getting started!

Image Credit: sharyn morrow

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  • Kendal

    Obli-cations are really tough to turn down when you’re going through a period of austerity. It’s easy to say “I’ve been working hard and not buying anything, so I deserve this!” There’s also FOMO, or fear of missing out. My husband and I initially planned to attend his cousin’s wedding in Ojai, Calif., but as we started formalizing our plans, we realized paying close to $1,500 for a quick weekend was not in the budget. While I’m happy with our decision, I am sad to miss out on what will be a really fun event with his family.

    • Shannon_ReadyForZero

      You are so right – I completely forgot about FOMO. Besides the fact that it’s hard to say no to social obligations, there really are a ton that are fun! Good for you guys for making a decision that was better for your finances – but would be tough to say no to Ojai!

  • Lisa Kovac

    I love the word “budget leak”, it makes it seem as if it is something a plumber can fix and it is out of your control. LOL

    • Shannon_ReadyForZero

      True, Lisa ;). I do know that’s how it feels sometimes – but it’s up to us to plug the holes!

  • Schooner1984

    What about combing the event with a planned vacation? If one is going cross country for a wedding, make that one of your vacations. Most folks do not have strict vacations plans. I always keep one of my three annual vacations plans flexible for weddings, FOMO, or whatever. It works for me.

    • Shannon_ReadyForZero

      Great strategy! If you are interested in the place you have to go to for those oblications, then making a larger vacation out of it is a great idea!