How Budget Leaks Cause Financial Havoc

budget leaks

When my husband and I first decided it was time to get our financial house in order in January of 2013, we thought it might be wise to go back over our 2012 spending to get a picture of what exactly we’d been doing with our money for the past 16 years.  We’d never officially budgeted before, but thankfully we generally paid for things with a debit or credit card, so we had records that we could go back to and use to itemize our spending.

The reason I bring up the benefit of having records is that without a detailed spending record to reference, it can be nearly impossible to effectively analyze purchases that are straining your budget or causing you to live beyond your means.

Budget Leaks Lead to Budget Washouts


Not too long into our research, we found several significant budget leaks that, although they seemed harmless at the outset, added up to big bucks over the long term. Even though we hadn’t officially budgeted in 2012, we did have perceived spending amounts in certain areas.

For instance, we assumed we spent roughly $600 a month on groceries, but learned that in 2012, we actually spent about $900 a month in groceries.  We had all but stopped going out to eat in 2012, save for an occasional trip to a fast food joint or a snack at the big box store snack bar, but because we didn’t track our spending, we didn’t realize that we were spending roughly $175 a month on “not” going out to eat.

Undiagnosed budget leaks can turn into big budget problems real quick.  Fortunately, there are a few things you can do to stop budget leaks in your finances and put that money to use for better things, like making progress toward your financial goals.

Figuring Out Your Financial Goals


If there’s one piece of advice I can give you that will help you plug up those budget leaks, it’s to take some time to figure out your financial priorities.  What is it that you truly want to spend your money on?  So many times we make spending decisions based on what feels good at the moment instead of what really holds value for us.

By making a list of your financial priorities and goals, and reminding yourself of those goals at each spending opportunity, you can learn to start making spending decisions based on what is truly important to you, and the automatic result is that those budget leaks will slow down dramatically.

Spend Tracking: Your New Best Friend


Several times before our actual journey toward being debt free, we had tried tracking our spending in order to get an idea of where our money was going.  However, guilt, panic and rebellion would set in within a few short days, and we’d throw our spreadsheet out the window, fearing failure, discipline and responsibility.

However, a trial run at serious spend-tracking revealed to us the endless benefits of tracking our spending each month.  Spend-tracking, you see, not only gives you a clear picture of where your money is going each month, it allows you to take money you’re spending on something unimportant, and move it to a more valuable place.

For instance, if you’re spending $300 a month on eating out, and you realize that eating out is not on your top priority list of what you want to do with your money, you can choose to allot $200 of that money for something more important to you, such as an extra payment on a loan or credit card, more money toward your early retirement goal, or as additional savings toward a vacation or a down payment on a house.

Choosing to track your spending doesn’t mean that you can no longer “have fun” or spend on frivolous things, it simply gives you a clear picture of what you’re really spending money on each month, which will in turn give you correct information to make a change in your spending should you want to.

Budgeting: Changing Your Perception


Budgeting was another area in which we had serious misconceptions.  We used to look at budgeting as punishment for not being responsible with our money, when in fact what budgeting really does is promote freedom.

How? Because budgeting gives you the opportunity to make sure you’re spending your hard-earned cash on what’s really important to you.  By assigning a place for each dollar that comes into your hands, you are assuring that all of your truly important financial goals are being achieved, and that you are stopping the budget leaks that so often ruin financial dreams and goals.

Budget leaks may be ruining your finances, but they don’t have to.  By following the tips above, you can repair those leaks, and make sure your financial ship is floating securely.


What budget leaks have you been surprised to find in your budget? Are you analyzing your spending now? If not, what’s holding you back? Are you afraid of what you’ll find?



Photo courtesy of: Maegan Tintari

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Laurie is a wife, mother to 4, and homesteader who blogs about personal finance, self-sufficiency and life in general over at The Frugal Farmer. Part witty, part introspective and part silly, her goal in blogging is to help others find their way to financial freedom, and to a simpler, more peaceful life.


  • Budget leaks are tough! We had to make a drastic change when we found out we were spending about that much on “not” eating out too! And, like you, our grocery budget was through the roof! Now, I watch our eating out, grocery, and gas budget like a hawk! It’s tough and requires commitment, but when I can give a successful budget update at the end of the month it gives a lot of satisfaction!

  • Amy says:

    Many of our biggest budget leaks probably relate to my daughter – the impromptu snack/drink while out, a new book here or there, etc. I really make an effort to not bring her to certain stores with me, because it becomes an endless negotiation. (Target “princess aisle”, I’m talking about you!)

  • Tracking our spending has always been huge for us. Our budget leak is almost always food!

  • Will says:

    I think the easiest place to get lazy is when grocery shopping. A few extra items can really blow up the bill.

  • I started using You Need a Budget in the beginning of July and it has made such a big difference! Prior to that I would set budgets, but tracking my spending was automated. The worst leaks occurred on weekends, since we were more likely to plan things on a whim, and the spending didn’t post to our accounts right away. Grocery spending is the big one for me right now, too. I either need to buckle down and find some cheaper ideas, or just accept that I need to spend more than my ideal. I was skeptical that YNAB would really change things for us like people said, but it really has! Between the ease of use and the attractive interface, it really does it for me.

    • Laurie says:

      So glad YNAB is working for you! We use an Excel spreadsheet, and also record expenses and totals immediately, which gives us an “in your face” snapshot of our monthly spending. That really helps when we’re faced with those “should we spend?” decisions.

  • It’s crazy how much of a difference it can make just to track your spending for one month. To see where everything is going. Even checking for patterns (Ie do I impulse buy at the grocery store more often when I am hungry). We have a few budget leaks right now that we are working to get under control.

  • We’ve never looked at a budget like punishment but you are right many people do. We were lucky that the budget actually guided us towards the debt freedom we have today. It’s a beautiful place to be. Finding the leaks by tracking our expenses were crucial. We found many and continue to work on meeting our goals so we get them under control.

    • Laurie says:

      You guys are a terrific example of the blessings of a budget – you have the ultimate payoff now that comes thru hard work and the willingness to identify the financial leaks in a budget. Kudos to you guys, Mr. CBB!

  • Ben Luthi says:

    Food is the most susceptible to budget leaks for us, so we always have to stay on top of tracking our expenses. I’m sure that if we just winged it, we’d be spending twice as much as we do–and it’s not necessary!

  • Awesome post Laurie, budget leaks can definitely be dangerous. At one point, I thought I was spending $175 a month on gas for my car. Turns out those extra trips to help out friends, or to the beach, or really anywhere I felt like going that day added up. I was actually spending about $400 a month! I don’t anymore, between hypermiling and paying attention to my gas spending, it’s gone down quite a bit!

    • Laurie says:

      Wow, Josh!! That’s similar to our story regarding eating out. It’s amazing how much more we often spend than we think we spend. This is the blessing that spend tracking provides: a true pic of where our money is going!

  • E.M. says:

    I have been tracking my expenses since I was in college. It’s such an important aspect of keeping your finances in check! I think a lot of people find surprises in their spending in certain categories, especially on food. When I first started creating a budget for my boyfriend, he was even surprised at how much he was spending on food while he was at work. The obvious answer was for him to take more food so he didn’t get hungry and tempted by the food truck that stopped by!

  • Spending tracking is the main problem we had before (we weren’t doing it) and it’s the main thing that helped us to get to where we are today with our debt pay down so far. We can find the leaks and fix ’em before they do too much damage!

  • Gary Weiner says:

    My wife and I have been using Quicken to track our spending for years. It helps us set, revise and stay within our budget. We even have monthly “budget meetings” to see where and why we differ from our budget and to make sure we’re on track for goals. Rather than see it as a punishment, we feel like it helps us stay informed and in control.

  • When I first meet with clients, I always say that they give me their perception of what is happening with their money, and then by our first quarter meeting, I have the reality and the two are frequently VERY different. It’s hard to create a realistic budget, when you aren’t living in reality with your spending. One of the best things I help clients with is tracking their spending and getting a really good idea where their spending leaks are, and once we know the problem areas we can fix them.

    • Laurie says:

      “It’s hard to create a realistic budget when you aren’t living in reality with your spending.” Shannon, I couldn’t have said it better myself.

  • I’m sure we’re still leaking badly on the food front as well. Still haven’t dived into fix it yet. Our main drain is related to remodeling costs. They just never stop.

    • Laurie says:

      Hey, Nick!! Good to see you! Yes, we have thousands in remodels we could spend on our house if we sat down and wrote a list. And food, that’s a common one. We’re saving $300-$450 a month on food now that we’ve plugged that leak. :-)

  • I’ve been tracking our monthly spending and income for nearly two years now. While I haven’t discovered anything surprising or out of the ordinary, it has been a great resource to make sure we are on track. Just like budget leaks can lead to a washout, I think having consistent savings can lead to HUGE savings when you start talking in terms of years.

  • Tracking our spending has been a great help to us. It really opened our eyes to where the leaks were. Groceries was one of them. Also, unexpected little things that come up can be a killer to the budget sometimes such as a home repair or car issue but the emergency fund is great for that.

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