Budget busters are areas that can lead you into financial disaster. When you overspend in one or more areas of your budget, other areas must be reduced to compensate for the overspending. Otherwise, your budget won’t balance and you’ll start to incur debt. We’ll discuss the most common budget busters below.

The following percentages are for a 4-member family with an annual gross income of $130,000 or less. Net Spendable Income (NSI) is the amount that results after tithe and taxes have been subtracted from gross income.

Housing (38 percent of NSI)

* Don’t buy or rent a house you can’t afford – total housing includes mortgage, taxes, insurance, utilities, phone, and maintenance.

* Don’t finance closing costs or secure a second mortgage for a down payment.

Food (12 percent of NSI)

* Plan and stick to written weekly menus.

* Don’t shop when hungry or hurried. Do shop specials, store labels, and use coupons.

Automobile (15 percent of NSI)

* Buy quality used cars you can afford, and don’t trade in before car’s usefulness is over.

* Auto price, maintenance, gas, tags, taxes, and insurance are all part of cost.

* Consider dropping collision insurance on cars more than four years old.

Debt (not housing or auto – 5 percent of NSI)

* Establish a payment schedule to pay all creditors regularly, and get rid of credit cards that you can’t pay in full each month.

* Sacrifice wants and desires – buy with cash until debts are current.

Insurance (5 percent of NSI – if your employer provides medical insurance)

* Find a well-informed, trusted insurance agent to get the best possible provision for the money.

* If you have no medical coverage through employment, consider major medical insurance – it can cover up to 80 percent of medical expenses due to catastrophic illness or injury.

Recreation/Entertainment (5 percent of NSI)

* Recreation-oriented Americans, who are in debt, shouldn’t borrow to entertain themselves.

* Plan vacations during off seasons, select local vacation destinations, consider camping.

Clothing (5 percent of NSI)

* Save money and buy without using credit.

* Purchase off season if possible, and select home washable fabrics and outfits that can be used in multiple combinations.

Medical and Dental (5 percent of NSI)

* Prevention is cheaper than treatment.

* Teach children to eat the right foods and clean their teeth properly. Good diet, rest, and exercise will most likely result in better health.

* Ask doctors and dentists in advance about costs, shop for prescriptions, and ask for generic drugs.

Savings (5 percent of NSI)

* Without savings, the use of credit and debt becomes a way of life.

* Use payroll deduction for savings. If it’s not available, your bank can automatically withdraw from checking account to savings.

Remember that budgets don’t operate on auto-pilot; they require effort and family understanding. If you’re determined to achieve and maintain a debt-free lifestyle, living on a budget is essential. Don’t bust your budget.

Originally posted 2/16/12.