Being good at budgeting doesn’t have to be difficult, especially if you plan for the unexpected. This added step of protection is often the difference between being successful with your budget or having your budget blown up. The key is understanding the expenses that can repeated blow up your budget.
What are the most common budget busters?
Non-monthly expenses such as auto insurance, homeowner association dues, even sports fees for our kids can cause the most damage to our budget. It is difficult to cut enough expenses to make these type of unexpected not impact your budget.
How do we handle the non-monthly expenses in our budget?
Usually for these expenses we know the amount, so just divide that amount by 12 months and save a little each month for those upcoming expenses. When the expense comes, you can transfer from savings to increase your income for that month.
Are there other situations that can destroy a person’s budget?
Three of the biggest are medical expenses, appliance replacement, and car repairs. These often come as complete surprises and leave very little time to make any adjustments to be able to cover these expenses within the monthly budget.
Because these type of expenses are usually very large, how can we solve this issue?
It really requires that you consider building a very large emergency fund, especially for the appliance and car repairs. For medical expenses, consider building your health savings account balance and make sure you have a reserve for those larger medical expenses.
Are there any hidden budget busters that we need to recognize?
Yes, the special events for friends and families such as attending weddings, buying anniversary gifts, celebrating milestone birthdays or even high school or college graduations. It is pretty easy to have two or three hundred dollars of expense in a given month if a couple of these events happen at the same time.
What is the answer for the surprise expenses like gifts?
This can be rectified by having a miscellaneous budget item as part of your budget and when you don’t use the amount in a given month, transfer it to savings account. This will should help you keep your budget from being impacted when you have two weddings, a birthday, and five graduation gifts to purchase all in the same month.