I’ve been kicking around an idea for a scary movie. The main character leads a fairly normal life with a stable job, an affordable apartment and a partner to share expenses with. Things are going well.
Then one day, they try to make a deposit at the bank – and there’s no record of an account by that name. When they show up to their job, that position no longer exists. Every trace of financial identity has vanished, and the character’s life spirals out of control until they eventually end up in a homeless shelter.
Maybe that’s a terrible idea for a movie, but financial horror stories do happen. Even if they’re usually not so dramatic, an unwelcome surprise to your budget can ruin the delicate sense of stability we all try to maintain. If you want to stay out of danger, it’s important to stay wary.
Here are a few common scenarios that can make you fear for your budget, and how to avoid them.
Last month I noticed that my gym, a large national chain, had double charged me. When I went in to ask about it, the manager informed me that I was charged an annual fee on top of my regular monthly subscription.
“What do you mean, ‘annual fee?” I asked. “I’ve only had the membership for three months.”
Apparently, an annual fee is charged three months into the membership, and will be charged every year. I was a little annoyed at being charged a fee for seemingly no reason, but I learned a lesson. Next year, I’ll be prepared for the expense.
Annual renewal fees tend to sneak up on you, throwing your budget into temporary chaos. Common examples include credit card annual fees, Amazon prime renewals, car registration fees and more. Most of us forget about these fees until they’re due.
Solution: Make a list of all the annual fees you have and write down what month they’re due. Next time you work on a budget, go through the list to see if any annual fees are coming up. If you end up finding more, add them to the list.
Do you ever open your electric bill, silently praying that it won’t be higher than what you budgeted? How many times have you opened that bill and been shocked at the total?
I used to dread opening my utility bills for this reason. I hated not knowing how much I’d have to pay, constantly worrying about whether or not I was prepared. There’s nothing worse than wondering what you’re going to cut out of the budget to make up for a huge gas bill.
Solution: I put all my utility bills on budget billing, so I pay the same amount every month. Sometimes that amounts to giving the utility company an interest-free loan, but I prefer knowing that my budget will always stay the same.
When I was moving out of my one-bedroom apartment into a place with my boyfriend, my landlord asked if I knew of anyone who wanted to take over my lease. I told him I’d ask around. I asked if the rent would stay the same, and his reply shocked me. It would be going up from $625 to $750 – a 20% increase.
I couldn’t believe it. If I hadn’t already been planning to move out, this increase would have forced my hand. When you’re making a measly reporter’s salary, $125 a month is no small sum.
Solution: Ask your landlord about renewing your lease months before it comes up. Many will only increase between 5-10%, but you never know when your landlord will get greedy. The earlier you find out, the more time you have to scout for new apartments or negotiate for a more reasonable rate.
While most of us hope to move up in our careers and increase our salaries every year, sometimes the perfect job comes along and you have to take a step back financially. There’s no shame in moving backward if it will allow you to move further forward in the future.
But what happens to your budget when your income decreases and your living expenses don’t? If you’re not careful, it can lead to a plummeting credit score and high-interest debt.
Solution: If you take a pay cut, the first thing you should do is reconfigure your budget. Go through the categories and see what you can cut or change, or find a way to make up the lost income with a side job.
I’m a freelance writer, so my pay varies every month. No two months are ever exactly the same, but they usually fall within $1,000 of each other. Because of that fluctuation, my budget can’t be as rigid as someone on a biweekly pay schedule.
If you live on a variable income, it can be pretty scary to experience multiple lower-than-average months in a row. When that happens, I try to trim any unnecessary expenses like going out to eat, buying concert tickets or saving for vacations. Usually the months even out, but it’s always scary when my income dips.
Solution: As a freelancer with variable income, it helps to have an emergency fund with three to six months worth of expenses saved up. That way you’ll never have to skip IRA contributions, bills, and other necessities.
Anytime the federal, local or state tax code changes, you’ll feel the difference in your take-home pay – and your budget. An increase in property taxes will mean you need to save more in your escrow account or risk a surprise bill at the end of the year.
If you get married, you may discover the “marriage penalty.” This is when couples get married, combine income and are subsequently bumped into a higher tax rate. For many couples, this means their take-home pay actually decreases.
Solution: Pay attention to tax changes in the news. If you’re confused about how they could affect you, ask your accountant or a CPA.