Budgeting for Fluctuating Bills
When you experience a heat wave or a freezing spell, you may be in for a shock when it comes to your power or heating bill. It can be difficult to budget for bills that are constantly fluctuating like your heating, electric or water bill. A huge utility can throw your entire budget out of wack and make it difficult to handle the rest of your expenses. Learn the different approaches to deal with these costs.
The Shift Things Around Approach
If your budget is flexible enough, you may be able to shift things from one category to another to cover the difference. It can work if the bill is up to $50.00 more than usual. However, it can be trickier if you see a jump of up to $200.00. When things dip below zero, your heating bill will go up, and you have very little control over that. You can shift from multiple categories or have extra money set aside to cover unexpected expenses if you want to take this approach. You can also use this by budgeting for the most expensive month of the year each month. Then you can put any amount that’s left each month toward your current financial goal, either paying off debt or toward savings. Do not incorporate this back into your typical monthly spending.
This is maybe the approach that most people do when they do not have a monthly budget. If you are trying to come up with a set budget for each month, using the averaging method below might be better for you. Otherwise, try budgeting for the most expensive month of the year each month.
The Averaging Approach
After you have lived there for about a year, you can add together the amount you spent for the year and then divide that number by twelve. It is the amount that you budget for the expense. The months that are lower than the amount, you leave it in the category to build a surplus to cover your more expensive months. This way things work out, and you can budget a set amount.
It is the best approach if you want to have a monthly budget that does not change from month to month. For this to work, you will need to be sure you set aside any portion that you do not use and roll it over into the next month. It means that you track your expenses each month and that you do not overspend in other areas.
What About Budget Billing?
Many utility companies will offer budget billing as a solution for the months that your bills go up. Each company works a bit differently, and it is important to understand the approach your company will take. They will average the cost of a year’s worth of use and charge you that amount each month. However, at the end of the year, you will still need to pay the difference if you used more power than they were expecting. This bill can hit you unexpectedly and can be quite expensive.
It is important to read the terms of the agreement because some of the companies will not refund you or give you credit if you ended up using less power over the course of the year. If your company does this, then you should steer clear of budget billing. However, if they will refund it, it may be a good option for you. If you do choose budget billing, you may want to set aside money if you notice your power usage is going up or if you have a particularly hot summer or cold winter.
Reducing Utility Bills
Although some conditions that affect your utility bills may be out of your control, there are still steps you can take to reduce the amount you use and save money. One of the most basic ways to reduce your power bill is to turn the thermostat down in the winter and up in the summer. You can dress warmer indoors, with sweaters and socks. Usually, about 65 degrees is tolerable. In the summers, you can move the thermostat up to 75 degrees.
You can also work to reduce the amount of water you use by limiting the length of your showers and cutting back on the number of times you soak in the tub to relax. You can take more drastic measures like installing a programmable thermostat and choosing better insulation for your house. You can also install low flow showers and toilets to save money on those costs too. Although these steps will not help with extreme temperatures, they can reduce the amount that you spend throughout the year and make it easier for you to handle the more expensive months. If you own your home, you may be able to save by choosing energy efficient appliances and changing to a tankless water heater. Some states will offer incentives to make these changes.