Things You Forget to Include in Your Budget
When putting together a budget most people begin by including their bills, such as mortgage and car payments, grocery costs, perhaps even the cost of their annual vacation.
But only base your budget on your monthly bills and grocery costs and you may be left wondering why your budget never works out. That's because you're forgetting incidentals. You know, those unexpected expenses that crop up every month that you never seem to plan for.
Learn the seven common categories that people often leave out of their budgets.
Most people remember to put groceries in their budget. After all, food is essential to survival, but they either lump the eating out and grocery category together or do not budget for eating out at all.
If you eat out even once a month, you need to include this item in your budget. Breaking down where your food money is going will give you more control and motivation to limit your spending in these categories.
You'll also need to budget for lunches out at work. If you realize that you are spending $100 a week on your work lunches, you may decide that packing your lunch is worth the savings.
Everyone has little things they spend money on to lift their mood. It may be a trip to your local coffee shop on the way to work each morning. Or it may be a trip to the convenience store for a soda and candy bar on the way home or during your lunch break. It may be the extra candy bar you slip into your cart whenever you run into the grocery store. It may be the extra book you buy each week for your commute or a DVD rental.
You don't usually budget for these because the spending amount is small, but it can add up quickly if you are doing it on a daily basis.
You don't need to stop this type of spending altogether, but you should include it in your budget so that you can figure out how much to allot for it each month.
A night out at a bar or going to the movies with your friends should also be factored into your budget. Many people will cut back drastically on this category, and then end up either overspending or feeling frustrated because they can’t afford to do anything.
You should have an entertainment category that will allow you to spend time doing the things that help you to relax, though you may need to cut back to one or two nights out a month and look for less expensive alternatives.
If you don't love shopping for clothes, you may leave this item out of your budget. If you are focused on getting out of debt, you may be diverting all of your money to extra debt payments.
Leaving clothing out of your budget means that needing a new pair of shoes, or new pants may throw your entire budget out of whack. Budget a little bit each month and allow the balance to grow so you can cover the items you need when you need them.
Another area that causes problems for many people are the payments that are due once or twice a year. These include property taxes or car taxes and registration.
One easy way to plan for these items is to add up the total you paid in the last year and then divide it by twelve. Set aside this amount each month so you will have money to cover the upcoming bills.
Emergencies are things you do not plan for, like your car breaking down, the trip to the emergency room or the unexpected plumber's bill.
These expenses can add up quickly and make it difficult to pay for them. You can set up sinking funds for some expenses like car repairs, and budget money to put toward an emergency fund to cover these expenses. You can also use your emergency fund to cover these expenses.
Although you may be able to handle the occasional birthday gift, you really should have a budget a category for gifts. You may want a separate one for Christmas gifts and expenses and one for general gifts.
Updated by Rachel Morgan Cautero.