Is There a Black Hole in YOUR Budget?

[Guest article today by my blogger friend, John Schmoll from]

What do you think of when you hear the term black hole? According to NASA, some of the hallmark characteristics of black holes are invisibility and varying size. They literally can’t be seen, and can be sized anywhere from a puddle to a sea.

What does this have to do with budgeting? A lot actually.

Budgeting black holes are any untracked expenses in your budget. Depending on what you are or aren’t tracking, these holes can be so tiny that they are virtually unnoticeable, or so large that they could be derailing all of your efforts to save money, spend wisely and invest for the future.

There are a variety of budgeting methods out there from the Zero Sum Budget, to a traditional budget to no budget at all. One of the main arguments against using any of them is that people picture the “typical” person who budgets, and they don’t want to turn into one of them. A bean counting grunt who never has fun. Trust me, I used to be an accountant and do NOT want to turn into that either. :)

I resisted budgeting for a long time at least in part because I grew up watching a family member who fulfilled the budgeting stereotype to a tee. He brought new meaning to being cheap and watched his budget like a hawk. Nothing was spent that he did not plan for and he knew where each penny was. Or at least, so I thought.

I was astounded one day to discover that my bean counting, penny pinching relative had an enormous black hole in his budget – booze and cigarettes. I kid you not, this man was almost religious about his budget, but when it came to his alcohol and smokes his diligence went straight out the window.

I’m not going to go into the impact on one’s health those habits can cause as I know I enjoy a drink or two. ;) I’d rather address the budgeting issue. While this family member was always harping about a budget and being diligent about watching it, there was an area which he didn’t watch and who knows how much money he spent on those two items over the decades he was doing so!

A Good Budget Gives You Room to Breathe

While the example of my family member is a bit on the nutty side, I believe it points out a solid point when it comes to budgeting – that you need to order your budget such that it allows you freedom to live. There are certainly times when you do need to watch your budget more stringently (like when you’re paying off debt) but even then you need to allow yourself to live a little.

The problem comes in when you allow this area to go unchecked wasting hundreds, if not thousands of dollars over the span of your life.

It’s going to look different for everyone, but what we do in the Frugal Rules home is budget for my wife and I to receive a small allowance each month that we can do whatever the heck we want with. While I may hold some of it back to do something fun with the kids, I largely save most of it so I can enjoy one of my guilty pleasures – my love for K-State football or my new one, brewing beer.

It may sound like I’m justifying my wants a bit, and maybe I am ;), but the point is that we allow ourselves this amount so we have something to enjoy. Yes, it may be frivolous, but it’s what I enjoy and we’ve worked to find balance with it. Additionally, knowing we have a little bit to spend on our wants keeps us from going overboard and making unwise, spontaneous financial purchases simply because we feel bored or deprived.

Comparing this lifestyle with what my family member did, I see that balance is what keeps us from having black holes in our budget. Spending, on many levels, is value based. We all spend money on what we value. There is nothing wrong with that at all as it’s human nature, but the problem occurs when it’s left unchecked.

The key is being able to spot these black holes, and knowing the size of them. Yes, it might mean that you have an area of your budget which isn’t as strictly watched, but life isn’t always about counting the beans.

Do you have a “booze and cigarettes” portion of your budget? How much do you allow yourself?

John Schmoll is the founder of Frugal Rules, a blog created to help people experience financial freedom through frugality. John is passionate about budgeting, saving and investing and enjoys sharing his knowledge and experience with others so they can avoid making some of the mistakes that he made. A veteran of the financial services industry, John has an MBA in Finance and experience as a licensed stockbroker

[Awesome doodle by: Orin Zebest]

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  1. a terrible husband... January 30, 2014 at 6:31 AM

    Lately it’s books and business courses/events. But I’m going on a course freeze until I finish the ones I already signed up for. I tend to accumulate them. :)

    1. John S @ Frugal Rules January 30, 2014 at 8:01 AM

      Oh, I’ve been guilty of “collecting” those in the past as well. :) I like your phrase though of course freeze – I may steal that for myself. ;)

        1. J. Money January 31, 2014 at 9:00 AM

          I do the same thing with domain names :)

  2. Dave @ The New York Budget January 30, 2014 at 7:37 AM

    I absolutely have one of these funds! A budget is worthless if you don’t stick with it and without some room for frivolous fun, I probably wouldn’t be able to stick with it.

    1. John S @ Frugal Rules January 30, 2014 at 8:06 AM

      Completely agreed Dave. I think they’re key to have so you can actually stay on the course you’re on with the budget.

  3. Matt Becker January 30, 2014 at 7:40 AM

    This is one of the reasons I love using an app like mint. As long as you pay for things electronically (which we do almost 100%) and actually take the time to track things (not too time consuming), it’s pretty difficult for their to be something you spend on without really realizing it. You can choose not to do anything about it, but month after month it will be staring you in the face.

    1. John S @ Frugal Rules January 30, 2014 at 8:08 AM

      That’s a great point Matt. If you’re really using something like Mint to its full potential then it really does force you to see it in hard numbers.

  4. Laurie @thefrugalfarmer January 30, 2014 at 7:53 AM

    Great post, John! We don’t really have any black holes in our budget, but like you guys, Rick and I both have a small amount of “blow money” for the money. This really does take the shackles off of a budget and help it not to feel too strict.

    1. John S @ Frugal Rules January 30, 2014 at 8:10 AM

      Thanks Laurie. :) That blow money is so vital so you can still live life.

      1. J. Money January 31, 2014 at 9:00 AM

        (Agreed 100%)

  5. Broke Millennial January 30, 2014 at 8:14 AM

    No kidding about being a black hole! Booze and cigs are crazy expensive. It reminds me of those stories about people who quit smoking and put all the money they’d normally spend buying cancer sticks (oh, sorry no judgement) into a jar. At the end of the year they could fund a family trip to Disney World or put in a pool or you know..invest it…

    I’ve started tracking all the money I spend as a New Year’s resolution. One month in and I’m not seeing consistent black holes yet, but I’m sure I’ll find something!

    1. John S @ Frugal Rules January 30, 2014 at 8:32 AM

      Oh, I know Erin. I wanted to use that term as well, though decided not to since it’s not my site. ;) That said, I’ve heard the same thing as well. This family member quit several years ago for health reasons and has said more than once how amazed they are that they have all this extra money in their budget and he was a two pack a day smoker. It just makes me shake my head, but glad they’re off them now.

      That’s awesome for you though. I’m sure you will find something over the course of the year, though if it’s within reason I think you’ll be doing good. :)

  6. Stefanie @ The Broke and Beautiful Life January 30, 2014 at 8:58 AM

    I’ve tried to eliminate cash spending because the lack of paper trail doesn’t make me feel quite as accountable as I’d like.

    1. John S @ Frugal Rules January 30, 2014 at 9:04 AM

      That can definitely make it more difficult to stay on top of it Stefanie. On the one hand it’s more “painful” to hand over that cash, but it also can make it more difficult to see where that money is going at the end of the month, quarter, etc.

  7. Kathy January 30, 2014 at 9:53 AM

    I can’t resist buying books no matter how much I try. Our local library doesn’t have the latest editions and since it is the local hangout for the homeless, it is not real pleasant to go there anyway. But we do have an amount budgeted for books and I try to adhere to that. My husband subscribes to several expensive investing services which has its own budget category.

    1. John S @ Frugal Rules January 30, 2014 at 10:14 AM

      My wife can be the same way Kathy. Sorry you have to deal with that experience at your library – we use ours quite a bit for our kids as they love it.

    2. Mrs. Jim January 30, 2014 at 9:26 PM

      Get a frickin kindle – SERIOUSLY- sometimes you’ve got to spend some $ to make some $. Drop $139 on a kindle hd 7 and you can get TONS of FREE books, mags, etc. I got mine 2 years ago and haven’t spent a dime on books/mags. And trust me, I couldn’t drive by a B&N and not stop in to drop a good $100 every time. I am a book addict and this kindle has let me indulge my addiction for no $ except the initial investment of $139 – they’re probably cheaper now.

      1. Richard @ Frugality Magazine February 8, 2014 at 4:17 PM

        Or just download the Kindle app so you can read all the free Kindle ebooks without having to pay for the Kindle itself…

  8. Martin January 30, 2014 at 9:59 AM

    My blackhole is eating. I’m trying to put on weight and it certainly isn’t easy. There are times where my eating budget isn’t pretty at all.

    1. John S @ Frugal Rules January 30, 2014 at 10:16 AM

      It can definitely get that way. We have some friends who have two boys in high school and college and both are athletes. They’re always eating something, I shudder to think of what their grocery bill looks like. :)

      1. J. Money January 31, 2014 at 10:48 AM

        Trying to bulk out while working out yeah? I used to have the same problem gaining weight too when exercising so much. A good problem to have in general, but not when trying to build some sexy muscles ;)

        Don’t worry though, in a few years you’ll start putting on more than you want, haha… Enjoy it, youngin’!

  9. Mark Ross @moneysavingdude January 30, 2014 at 9:59 AM

    I don’t drink that much and don’t really smoke – ever, so I think my budget is fine. Although, I could still do some reducing when it comes to my food expenses.

    1. John S @ Frugal Rules January 30, 2014 at 10:17 AM

      That’s good to hear Mark. :) I think there are areas we all could be a bit better about, but make sure you give yourself an area so you can enjoy life. :)

  10. Mel @ brokeGIRLrich January 30, 2014 at 10:00 AM

    Oh my gosh, I’ve been starting to help my mom set up a budget and it’s just an endless pile of black holes. And let’s not even get me started on her two pack a day habit that would pretty much single-handedly take her from the red into the black if she would just give it up. Not to mention I’m pretty darn fond of her and would prefer she stop killing herself.

    1. John S @ Frugal Rules January 30, 2014 at 10:19 AM

      Awesome that you’re helping your Mom with that Mel! Though I can empathize with wanting her see how cutting the habit would help in a big way – on multiple levels. :) I’ve been working with a younger family member and they just don’t see the problems they have with their black holes, patience is definitely needed. :)

  11. Chris @ Big Day Coming January 30, 2014 at 10:11 AM

    I totally agree. People need to have some hobbies that they can spend on, but oftentimes our guilt over it makes us not really track the amount. With something like Mint and always using a debit or credit card you’ll be tracking the transactions automatically, but not necessarily breaking it out in your budget or proper category. You could pretty easily just let it fall into their “Everything Else” bucket and totally ignore it forever.
    The point is to be aware of your own “funny money”/hobby and track it without letting yourself feel too bad about the fact it even exists. And in some cases it can be helpful to know if it’s getting out of hand and if there are reasonable tradeoffs you can make in another area to offset it. For example, I like drinking beer. I like trying lots of craft brews and I was always grabbing some fancy bottles when I went to the grocery store to try them out. The amount started to add up. Now I do homebrew instead and not only do I get to learn how to make beer and try new styles, but I can actually do it cheaper than running out and buying whatever catches my eye. I traded off buying multiple $5-15 bottles, to buying $35 kits to brew 5 gallons of my own.There’s something very satisfying about getting a buzz off of a good drink you made yourself. Grows hair on your chest!

    1. John S @ Frugal Rules January 30, 2014 at 10:22 AM

      Totally agreed Chris! I’m a fellow beer lover myself and that is part of the reason why I started homebrewing about a year or so ago. It may not be cheap to start, but over time it does help cut the price down a good bit and, I agree, there is something very satisfying about enjoying a good brew you made yourself. :)

    2. J. Money January 31, 2014 at 10:50 AM

      HAH! AWESOME!!! I want more hair on my chest!

  12. Crystal January 30, 2014 at 12:32 PM

    We just absorb unexpected travel and birthday gift expenses. We have a vacation fund that covers them if it can, but if it’s empty, our monthly extra covers it and we just have less to spread around the savings accounts. It’s been working well for us.

    1. John S @ Frugal Rules January 30, 2014 at 4:15 PM

      Sounds like something similar to what we do Crystal. I’m always guilty of spending more on vacation then we intended to, so it’s a good thing we don’t do it all that often. ;)

  13. Grayson @ Debt Roundup January 30, 2014 at 1:05 PM

    Making beer is my black hole. It can easily get out of hand when I am at the beer store and then it goes beyond my hobby and starts stealing from other parts of my budget.

    1. John S @ Frugal Rules January 30, 2014 at 4:20 PM

      I’m quickly learning how that can be a black hole for me sir. Then you’ve got to wait for it to finish brewing and buy beer to have in the meantime. It’s a vicious cycle my friend. ;)

  14. Shannon @ Financially Blonde January 30, 2014 at 1:42 PM

    My black hole is definitely date nights with the hub. When we realized how much we were spending on food, drinks and babysitting it was crazy. Now we use side hustle money for the dates, so when we have the money put aside, we know we can spend it. And we have changed up our date routine. We now meet up for happy hours. Not only are the food and drinks cheap, but my son is in an after school program until 6pm, so we don’t have to pay a sitter. :-)

    1. John S @ Frugal Rules January 30, 2014 at 4:22 PM

      I think there are a lot of worse things that could be a budgeting black hole Shannon. :) That said, I LOVE the creative thinking! We do some of the same things ourselves and swap babysitting duties with friends of ours who have kids as well so it’s free for both of us.

  15. Izzye G January 30, 2014 at 3:13 PM

    My Black hole is shopping at thrift stores( Recently discovered the Salvation Army and Goodwill) Got to admit I have found great items that I could not afford otherwise.
    I have been going weekly this past month spending on the average $60-80 dollars Ouch :(
    I will cut down my visits to once every 2 weeks and no more than $50.00 per month then once per month until I have completed my professional wardrobe.
    Thanks for raising awareness!

    1. John S @ Frugal Rules January 30, 2014 at 4:25 PM

      I think that’s the “danger” of shopping at a thrift store – you snap up the deals and forget about them all adding up, at least that’s what we’ve been guilty of in the past. Good thinking in streamlining your spending!

    2. Fig January 30, 2014 at 5:01 PM

      OMG I love thrift stores! It totally adds up though even if you are getting a great deal on everything.

      1. J. Money January 31, 2014 at 10:52 AM

        What you gotta do now is start FLIPPING some of the deals y’all are finding to help supply you the money to keep shopping for yourself ;) That’s what real hustlers do!

  16. Fig January 30, 2014 at 5:01 PM

    Great post! My black hole is definitely food. I spend way too much and I know I spend way too much! I have been trying to cut back and lately have been better about how much I spend on groceries and eating out. Luckily cutting back and just being aware has helped a lot and the blackhole is a bit smaller. :)

    1. John S @ Frugal Rules January 30, 2014 at 5:32 PM

      Thanks Fig! Food can be a tough one to take care of, but awesome for you for making that black hole a little smaller. :)

  17. Wunderwriter January 30, 2014 at 7:20 PM

    Black holes: veterinary expenses and medical co-pays and prescriptions. These are two areas where I really need to document the expenditures (I’m thinking of doing so anyway, since it’s income tax time), and dividing the total annual cost by twelve so I can add this in as a line item to our budget. I’ve resisted doing so, mostly because I don’t want the hassle of documenting all the medical expenses (there are many), but it’s become such a large expense every month it’s time to just accept it and move on.

    1. John S @ Frugal Rules January 30, 2014 at 9:05 PM

      I agree, that can be a hassle. We used to have two dogs (we don’t have them anymore as my in-laws do) plus our cat and we ended up having to do just that. It just made it easier for us as the bills became too regular for us. Best of luck implementing that moving forward. :)

  18. Aimee January 30, 2014 at 8:31 PM

    Booze and butts huh? Does anyone budget for addiction? ;)

    I have a $50 per week “miscellaneous unplanned” line item that’s for dining out, clothes, movies, etc. I blow this budget line item consistently. I think I need a different way to account for it because if I buy something one week that I want/need that’s over $50 I’ve already blown the budget, or if I go to dinner and it runs me $30 then I only have $20 left. I feel like $50 is plenty, but it isn’t! Writing about it now I have no idea how I blow it EVERY week. I’m not a big shopper and only go to the movies a couple times a year. Mind you, I track every penny I spend by tying my budget to my bank balance so it’s not squandered cash. This has been bugging me for a while.

    Also, I am an accountant so there is an urge to be a bean counting grunt that never has fun so I can meet financial goals. My bosses have been accountants for 25+ years which is terrifying!

    1. John S @ Frugal Rules January 30, 2014 at 9:13 PM

      Lol, I know!

      We used to have the same exact issue ourselves. We had $50/month to spend on whatever and it usually ended up getting blown on stuff that we didn’t know what it was. We ended up padding our entertainment budget a bit more and adding an allowance for us and that solved a big part of the problem.

      I was an accountant for about five years and can totally relate. Thankfully I have my wife to help my not go over the top with my bean counting ways.

      1. jim January 31, 2014 at 6:16 PM

        Wow! Just read the article on the guy who was addicted to wealth. What a story. Thanks for sharing that.

      2. Aimee February 1, 2014 at 5:00 PM

        I feel conflicted about liking an article by a guy who made boat loads off of credit default swaps in 2008 while I was fielding customer service calls at an investment firm 12 hours a day earning my addiction to Diet Coke… This kinds of reminds me of gangsters who make millions of unreported money dealing drugs and whatnot and just keep going until they get caught, have everything taken away, and go to jail. Why don’t they just stop when they have a ton of money and live out the rest of their lives? It’s the power! I always say if I found a way to make a ton of money (legally of course) I’d do it for a short while and quit, but you never know how it will affect you. An old classmate contacts me a couple times a year to go work at one of the big 4 accounting firms, and I know if I do then my life will be miserable but I will double my salary. I think if I went to that firm I could work for 2 years, bank tons of cash, buy some land to build a tiny house and go back to my slower paced accounting life but I KNOW I won’t get those 2 years back! AND what if I can’t bring myself to cut my salary in half?? I think I went off topic. I guess I have a lot on my mind!

        1. J. Money February 2, 2014 at 3:33 PM

          Haha… It’s something to definitely be careful of! And very similar to gambling too. Everyone says they’ll quit once they “hit it big” but the % who actually do is quite small. And plus you have to first HIT IT BIG before you can even get a chance to cash out – also very hard to do. The worst though is when you hit it big like the first hand you’re dealt! If you’re there the whole weekend (like in Vegas or something) there’s no way you’re gonna stop because half the fun is experiencing it all and playing for a while not *expecting* to win, haha… You win towards the end of that vacay though and it’s home-free you go ;)

  19. Amanda @ Passionately Simple Life January 30, 2014 at 9:01 PM

    Really great post!!! Booze and cigarette black hole belongs to snacks and wine for me! I can overspend by a ton one month and then find myself not spending anything on them the next month. It’s really sad, but I’ll end up just not keeping all my receipts and putting it into my notebook. At the end of the month, I’ll be like, yeah, I only spent $40….

    1. John S @ Frugal Rules January 30, 2014 at 9:15 PM

      Thanks much Amanda! Those up and down months can be interesting. If I could only smooth it out a little better. :)

  20. E January 31, 2014 at 10:27 AM

    Books and video games are a budgetary black hole that will suck the dollar signs out of any account. Unfortunately, half of what I love about them is collecting them, so library books and game rentals usually just leave me determined to own my own copy.

    My compromise is having a separate savings account for “me” purchases. I put a little bit in there every paycheck (most goes to the emergency fund), and whenever there’s a book or a game I want, I use the money from that account to pay for it. If I don’t have the money in that account yet, I have to wait until the little bit I put in on paydays accumulates into enough to buy what I want. And because I have a slight hoarding mentality with savings, I’ve had a surplus in that savings account for quite a while now. This does a pretty good job keeping me in check.

    1. John S @ Frugal Rules January 31, 2014 at 4:47 PM

      I can see how that would create an issue. ;)

      Way to go with the separate savings account! We accomplish the same thing with our allowance that each of us have as we’ll save it up for something either of us want.

    2. J. Money February 1, 2014 at 8:05 AM

      There could be worse things to hoard than books and cash :)

  21. Kalen Bruce @ MoneyMiniBlog February 1, 2014 at 12:27 PM

    Those black holes can be so sneaky. I used to have a few. I would account for car maintenance, but not expenses like registration, tag renewal, etc. Another people often miss is budgeting for cigarettes and booze like you said, but it’s especially a problem when they deny the habit. If you say you quit smoking, but you still buy a pack once a week, you have to be honest about that and budget it. I have seen black holes in budgets almost every time I sit down with someone to work on their finances. I am even writing an eBook right now on budget items that most people miss. lol Great topic and great article!

    1. J. Money February 2, 2014 at 3:34 PM

      You better come up with a catchy ass name for that eBook :) “101 Stupid Black Holes In Your Budget” haha… (though check with John first – he may have trademarked it ;))

  22. Marissa@Financetriggers February 11, 2014 at 7:56 AM

    Budgeting your finance expenses is really necessary if your planning for investment and just starting your own business. Love your article. Great job!

  23. J Neal March 8, 2014 at 1:16 PM

    I found our website via a post at from the blog at I have used their tool for about 6 months now, and it has really helped me get a handle on my spending. Pre YNAB, my black hole was eating out. Now I have cut that down to about a quarter of what it was in June. Since YNAB, I had a category that I would always go halves with my sister on. I had the account, so I would always pay, and she would pay me back via cash. This was a black hole for me. Lately however, I have asked her to pay me back via a transfer to my bank account (she pays me rent so she was already doing this once a month). My only black hole remaining is the $10 per paycheck ($20 per month) that I give myself as cash spending money. I have no idea where that money generally goes by the end of the month, but I am ok with that. I think I will keep that black hole.

    1. J. Money March 12, 2014 at 8:08 AM

      Not a bad black hole to have at all! I used to give myself $100 every paycheck and not know where it goes – so $10 seems like a much better idea :) Thanks for stopping by today – glad YNAB is helping you so much! Love what Jesse’s done with it over time. Helping tons of people.