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You’ve made your budget, but you always seem to miss something or are not prepared for an expense. How do you know what you need to include in your budget and how to budget for it?
The key to making it work is that you account for all of your expenses – especially the ones that you pay less frequently than once a month. These are the expenses that you are likely to forget about until you get a “surprise” bill. This will make it much easier to get your money on track, have a budget that you can stick to, and reduce any surprises when it comes to expenses!
Since we have a zero-based budget, all of our dollars are assigned into a category each month. Because of this, it is really important to have the money in your budget to cover these expenses. I know when we first started budgeting, this was an area that we really needed to pay attention to. Nothing like getting your six month car insurance bill only to realize you didn’t budget for it, right? Yes, I did that.
Here’s what you need to include in your budget:
The best way to manage these expenses is to create fund categories.
Each month, fund your categories so that when the expense needs to be paid there is enough set aside to cover the expense.
For each of the fund categories that you need to create, write down all of the expenses and then divide it by the number of months you have to save up for it. So, if your car insurance is due in four months you’ll take the total and divide it by four – that’s how much you are you are going to put in the fund each month.
Holidays & Gifts
Decide how much you need to include in your budget for holidays and other gifts. This is the time that you want to figure out what your Christmas budget is going to be – not a few weeks before as you are scrambling to get gifts for everyone on your list. Make sure you give yourself a little cushion for the unexpected gifts that come up and a reasonable amount (key word here – reasonable!).
Some might be due monthly, every three months, yearly, etc. Make sure you are including all of these in your budget. I keep a separate spreadsheet in Excel of all of our subscriptions. I include the cost, what category it is budgeted in, and if I have a free trial when that expires. Although this is an extra step, it has been a huge help in keeping track of these things and avoiding any surprises.
Home & Auto Expenses
We have a really old house and there are things that come up that need to be fixed without fail. Same with my car. Although it is relatively new and reliable, I have been caught off guard with some unexpected repairs. You cannot predict the future, but it is a good idea to set aside money each month into funds for these unexpected expenses.
If you are paying off debt, Dave Ramsey suggests you put $1,000 into an emergency fund and keep it funded. So, if you need to use it for an unexpected emergency expense you will need to build it back up to $1,000 and put your debt snowball on hold until you do that. Hint – Christmas gifts are not an emergency since you will already be planning for these expenses in your monthly funds! You already decided how much you need to include in your budget for gifts, right?
If you are debt free (yay for you!), then you need to also budget for building up an emergency fund of 3-6 months of your expenses.
I can’t stress enough how important it is to have funds built into your monthly budget. You will be prepared for all of your expenses and stay within your budget.
Looking for more ways to put save money in your budget? Here’s a few more posts that can help:
Do you have fund categories in your budget? How do you think this will help you and your budget?