Have you ever tried to budget and every month something came up that threw it off? This happened to me a lot in the beginning. It was frustrating and discouraging. Last week we talked about setting up your budget. You have seen how liberating it can feel to be in charge of your money. Today we are going to talk about 5 of the most common, unexpected expenses that will blow your budget.
5 Biggest Categories That We Forget to Budget
5. Annual Bills
Life happens; cars break down, someone has an unexpected medical bill, your heater breaks in the middle of winter. If you are not prepared, these events can break up your budget in an instant. Dave Ramsey’s first baby step is to set aside $1,000 dollars for emergencies. That way before you even start paying off debt, you should make sure that you have a minimum of $1,000 saved for a “Rainy Day” emergency.
Depending on the size of your family and what you do for holidays this can encompass more than Christmas. Do you have a 4th of July party every year? How much do you spend on pumpkins and Halloween costumes? Make a list of all the holidays. Which holidays do you need to buy food, decorations or gifts for? Now, estimate how much you are going to spend for each holiday. Add up the total and divide that by 12 months. This is how much you should be setting aside every month to make sure you’re not caught by surprise.
Too many times vacations are put on credit cards. We go and have an amazing time only hoping that the vacation fairy will come and wipe our debt away. With a little planning, you can budget out how much a trip will be before you step on a plane. You can start saving and have the trip paid for before your first cocktail with an umbrella.
Certain bills can be paid annually to receive a small discount and savings. I currently pay my auto insurance, life insurance and gym memberships a year in advance to save a little bit extra. The trick is that every month I set aside the money so when the bill comes, I am not taken by surprise.
Once you have figured out how much you need to save each month figure out what works best for you. You can either set cash aside in an envelope or set up an automatic transfer from your checking to your savings. You are quickly on your way to becoming Budgeting Rockstar!