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Three Expenses People Leave Out of Their Budget

You think you’ve created the ultimate budget. You spend hours looking through your bills, figuring out what you typically spend on groceries, fuel, clothing and other normal expenses. You created a budget that accounts for all of these costs. Now you can sit back and relax. You’re done — right?

Not so fast. There are a few items that are commonly left off people’s budgets — and not accounting for these expenses can seriously derail the best-laid spending plans. Let’s take a look at some of the costs that you might have forgotten to budget for.

#1: Holidays

“But the holidays are over!” you’re thinking. “The holidays aren’t coming up for another 11 months!”

Yes, that’s precisely the mentality that gets people into trouble. You see, many people realize — with a shock — that it’s suddenly November, and they need to come up with the money to spend on holiday travel and gifts within the next month. Then they scramble, trying to find that money.

But there’s no reason for this. We know that the holidays happen at the same time each year. Why not budget for it, all year long? Just find out how much money you spend during the holidays on all expenses — throwing dinner parties, traveling to family members’ homes, giving gifts — and divide this by 12. This is the amount that you should set aside throughout the year.

By the way — don’t just focus on the winter holidays. Think also about that summertime holiday trip that you want to take to a beach. Yes, this is totally optional, and if money is tight, you can stay at home. But if you’d like to take a holiday trip once a year, set aside a little money all year long.

#2: Quarterly, Semi-Annual, Annual and Irregular Bills

You pay for most expenses in two ways:

  • Fixed Cycle — Your electricity bill or your mobile phone bill, for example, might arrive once per month on a fixed cycle.
  • Frequent but Irregular — Your grocery expenses, fuel for your car, and dog food, for example, don’t get billed in regular intervals — they’re irregular — but they happen often enough that you remember to account for them in your budget.

But there are some expenses that you might pay quarterly, semi-annually or annually, such as:

  • School fees
  • Summer camp dues
  • Birthday gifts
  • Water or sewer bills (depending on where you live)
  • Veterinary bills
  • An increase in a utility bill (such as higher gas bills during the winter months)
  • Home repairs and maintenance
  • Automobile repairs
  • Seasonal care (like shoveling snow or lawnmowing)
  • Traffic violations, fines and tickets

Because these bills happen so rarely — you might only see your veterinarian once a year — many people forget to plan for these. Again, create a line-item in your budget for each of these expenses, and then divide by 12 so that you can set aside money every month.

#3: Savings

One final tip: Many people will create a budget for all their bills, and save whatever is left over. Why not try the opposite? Build “savings” into your budget, and pay it each month as though it’s a bill. In fact, make it the FIRST bill you pay, not the last, because it’s the most important.

If you don’t have enough money to pay all your bills — including your savings bill — you know that you’ll need to either cut some expenses (like drop that magazine subscription), work longer hours (or take a second side job), or both.

Paying into your savings, as though it’s a bill, forces you to save. It elevates savings from a “want” to a “need.” You can then use those savings to pay off debt, make a downpayment on a house, throw a wedding, pay medical bills or enjoy a more pleasant retirement.

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