One of the hardest things to face is being diligent with your spending, putting away savings for a rainy day, and yet feeling like you are never getting ahead. It feels like every time you turn around there is another unexpected expense which drains the “rainy day” account or ends up on the credit card or line of credit. How is anyone supposed to get ahead?
The funny thing about a budget is that we automatically resort to creating a monthly budget. It’s not hard to see why…most of us get paid bi-weekly or monthly, and our bills come out a monthly basis so it just makes sense! The problem is, not all of our expenses are monthly. There are items that “pop up” during the year that catch us by surprise due to their irregularity. If we pause a moment though we may see these expenses are predictable….they maybe are just not at the forefront of our minds.
Here are some examples:
- Vehicle maintenance: On a monthly basis, most of us would include a budget for car payment, gas, and insurance. The vehicle also needs regular maintenance like oil changes and fluid flushes. Look at your owner manual to anticipate what expenses will come due this year and call around to see how much the shops in your area charge for these services. If you expect $1,000 worth of preventative maintenance , you should budget $83 ($1000/12) per month for this expense. For those of us with older cars, it would be a good idea to increase this by say $50 per month to $133. The additional $50 is for unexpected maintenance expenses. After all these are machines and things break! Additional things to consider in this category include tires (Winter/summer), car registration, car washes and any accessories.
- Vacation: It’s so important to take time for yourself and your family to recharge and relax. Think about what vacation you want to take this year. All inclusive trip to Mexico? Couples yoga retreat? Disneyland? Prepare a budget for this trip. It does not have to be a laborious exercise – just something simple. Then put away some money each month to get to this goal. I cannot over emphasize the importance of this one! When times get stressful, it’s easy to say “we don’t have the money for fun.” However, if you have been consciously putting some funds away each month for this purpose, much of the stress is taken away about affording the trip. It also encourages you to minimize impulse spending knowing you are saving for a bigger goal! Also think of how awesome it would be to come home after a trip with a credit card balance of ZERO because you already paid for it 🙂
- Electronics: phones, tablets, laptops, PCs, smart TVs, cameras….the list is endless. These consumer goods seem to have shorter and shorter life spans and require regular replacement. Decide what items in your house will be upgraded this year. Keep a look out for sales and deals. This is even more important if you are a small business owner relying on technology to keep the business going. Have an IT plan and a budget in place. Set aside a dollar amount each month to cover the annual IT upgrades
- Team sports fees: many people are involved in recreational sports as an enjoyable pastime. These operate on a season basis. Do you have the money set aside to pay for 2 kids hockey fees plus your yoga subscription? What about the hockey registration that is coming up? How many tournaments will the different family members play in this year? It feels like when these expenses come up we feel “the pinch” or it’s a “tight month.” It doesn’t have to be! Include sports fees in your monthly budget, even though it is not paid on a monthly basis.
There are so many more examples, but hopefully this illustrates that a budget is best looked at on an annual basis and then broken down to a more meaningful and manageable monthly schedule. You really are going to miss out a significant amount of expenses if just looking at the monthly picture.
Also, did you know many companies offer a discount if you pay your bill up front for the year? Take insurance for example. Rather than pay the monthly premium, if you are confident in managing your cash flow, you can just pay for the entire year and possibly pay less!