Budget busters are the large potential problem areas that can destroy a budget. Failure to control even one of these problem areas can result in financial disaster. Below we have given suggestions on how to identify and resolve potential troublesome areas before they become budget busting problems.¹ The percentages used are based on a four-member family with an annual gross income of $30,000 or less.

Housing (38 percent of Net Spendable Income)

Typically this is one of the largest budget problem areas. Many families buy or rent a house they cannot afford. Housing decisions should be based on need and financial ability, not on internal or external pressure. The following are ways to avoid potential housing problem areas that could become budget busters.

1. Purchase a home only if total housing payments (mortgage, taxes, insurance, utilities, phone, and maintenance) do not exceed 38 percent of Net Spendable Income.²
2. Do not finance a second mortgage for a down payment and do not finance closing costs.
3. If trading, make sure it is a need and not simply a desire.

Food (12 percent of Net Spendable Income)

Many families buy too much food. Others buy too little. The reduction of a family’s food bill requires quantity and quality planning. The following are ways to avoid potential food problem areas that could become budget busters.

1. Plan a weekly family menu and stick to it.
2. When shopping always use a written grocery list and do not deviate from it, if possible.
3. Avoid shopping when hungry or in a hurry.
4. Avoid expensive prepared and frozen foods.
5. Purchase sundry items, household cleaning products, and paper products at discount retail stores or retail warehouses.
6. Shop advertised specials and use manufacturer’s coupons.
7. Try generic or store brand products.
8. If at all possible, avoid shopping with small children.³

Automobile (purchase and maintenance,15 percent of Net Spendable Income)

Often consumers are unwise when it comes to both purchasing and maintaining automobiles. Many families buy cars they cannot afford and trade them in long before their usefulness has expired. Other than salespeople who need new cars regularly, most Americans trade cars because they want to rather then need to. In addition, most Americans pay premium prices for repairs and general maintenance on their cars, which many times can be avoided. The following are ways to avoid potential automobile problem areas that could become budget busters.

1. Automobile expenses (monthly payment, repairs and maintenance, gas and oil, tags and taxes, and insurance) should not exceed 15 percent of Net Spendable Income.
2. Evaluate the reason for trading. Is it a need or simply a desire?
3. Can a present car be repaired for less than six monthly payments on a new car?
4. Pay cash for a new car if possible. If not, make sure the current car is paid off before purchasing a new one.
5. Buy a quality used car rather than a new one.
6. Avoid car leases.
7. Perform routine maintenance and minor repairs yourself.
8. Purchase supplies at wholesale distributors.
9. Use the cheapest gasoline recommended by the owner’s manual.
10. Consider dropping collision insurance if the car is four years old or older.⁴

Debts (5 percent of Net Spendable Income)

Although it would be great if family budgets restricted themselves to only 5 percent debt (credit cards, bank loans including home equity loans, and installment credit), the unfortunate norm for the typical American family far exceeds this amount.⁵ The following are ways to avoid potential debt problem areas that could become budget busters.

1. Destroy any credit card that you cannot pay in full each month.
2. Establish a payment schedule that pays all creditors regularly.
3. Buy with cash and sacrifice wants and desires until debts are current.

Insurance (5 percent of Net Spendable Income—assuming an employer provides medical insurance)

Few families understand how much and what kind of insurance is needed. Insurance should be used as a supplementary provision for the family, not protection or profit. Insurance is not designed for saving money or for retirement. So, select insurance based on God’s plan for your life, not what someone else says you need for your life. The following are ways to avoid potential insurance problem areas that could become budget busters.

1. Use a well informed and trusted insurance agent to determine the best possible provision for the money.
2. Consider buying term life insurance. If whole life exists, determine whether the coverage should remain in force or be converted or, at the very least, borrow the cash reserve and reinvest it into secure, higher interest programs.
3. If medical coverage is not provided by an employer, consider buying major medical insurance rather than hospitalization. This insurance is relatively inexpensive, sometimes less than $1,000 per year, yet it covers up to 80 percent of medical expenses due to catastrophic illnesses or injuries.⁶

Recreation/Entertainment (5 percent of Net Spendable Income)

Although Americans are a recreation-oriented society, those who are in debt should not use their creditor’s money to entertain themselves or their families. The normal tendency is to escape problems, if only for a short while—even if the problems then become more acute. Although families need a certain amount of recreation and fun in order to maintain a healthy family atmosphere, they also must resist the urge to indulge excessively and control recreation and entertainment expenses. The following are ways to avoid potential recreation/entertainment problem areas that could become budget busters.

1. Plan vacations during off seasons if possible.
2. Select local vacation destinations.
3. Play family games instead of paying for entertainment.
4. Consider camping and cooking out rather than renting a motel or lodge and eating in a restaurant.
5. If flying, purchase tickets at least 21 days in advance (if possible) and select the least expensive coach fare.

Clothing (5 percent of Net Spendable Income)

Many families in debt sacrifice this area in their budget because of excesses in other areas. And yet, with prudent planning and buying, families can be clothed neatly without great expense. The following are ways to avoid potential clothing problem areas that could become budget busters.

1. Save enough money to buy without using credit.
2. Make children’s clothing if talented in that area and as time allows.
3. Make a written list of clothing needs and stick to it. Purchase during off season as much as possible.
4. Select outfits that can be mixed and used in multiple combinations.
5. Buy from discount outlets and factory outlet closeouts.
6. Select home washable fabrics in new clothes.

Medical and dental (5 percent of Net Spendable Income)

Families need to anticipate these expenses in their budgets and set aside funds regularly to cover the expenses. Do not sacrifice family health due to lack of planning, but at the same time do not use doctors and dentists excessively. Prevention is much cheaper than treatment or correction. The following are ways to avoid potential medical and dental problem areas that could become budget busters.

1. Teach children to eat the right foods and clean their teeth properly.
2. Take care of the physical body through diet, rest, and exercise, and it will most likely respond with better health.
3. Question doctors and dentists in advance regarding costs.
4. Shop around for prescriptions and ask for generic drugs.

Savings (5 percent of Net Spendable Income)

It is important that families establish some savings in a budget. Otherwise, the use of credit becomes a lifelong necessity and debt, a way of life. A savings will allow for the purchase of items with cash rather than credit, irrespective of the store. The following are ways to avoid potential savings problem areas that could become budget busters.

1. Use payroll deduction, if possible, for savings. This removes the money for savings before it is received as salary.
2. If payroll deduction is not available, use automatic bank withdrawal from the checking account.
3. Write a check to the savings account as if it were another creditor.
4. When an existing debt is paid off, reallocate that money to savings.⁷

Conclusion

By using these suggestions, families have the necessary tools to establish a budget and to guard against problem areas that could become budget busters. No budget will implement itself; it requires effort and family communication. Living on a budget is not only practical, it is absolutely necessary in order to maintain a debt-free lifestyle.

¹ Larry Burkett, Your Finances in Changing Times, Moody, 1975, p. 140

² Larry Burkett, A Guide to Family Budgeting, Christian Financial Concepts, 1996, p. 12

³ Mary Hunt, Tiptionary, Broadman & Holman, 1997, pp. 301-307

⁴ Larry Burkett, Major Purchases—Housing and Cars, Christian Financial Concepts, 1996, pp. 47-48

⁵ Larry Burkett, A Guide to Family Budgeting, Christian Financial Concepts, 1996, p. 14

⁶ Larry Burkett, Answers to Your Questions About Insurance, Christian Financial Concepts, 1999, pp. 15-32