I’ve been budgeting since I was in college. And while I’m typically pretty successful in my efforts to lay out and abide by a budget, sometimes things don’t go as planned. Thankfully, such mishaps typically don’t result in a major interruption of my personal finances, and I’ve been able to learn from them and make adjustments as needed. However, I’ve noticed four major reasons over the years that have caused those hiccups that have occurred in my budgeting efforts.
No reserves
It rarely fails that a month passes without an unexpected cost of some sort. Whether it’s a birthday or wedding gift for family member or friend, a doctor bill, a car repair, a school cost for the kids, or whatever, there is often something that I haven’t accounted for in my budget. While it might not always be a huge cost, it could be enough to bust my budget, and running a string of busted budgets can not only wear on us financially but be a motivation killer as well.
This is why I’ve built a small reserve fund into our budget. I typically add around $100 to $200 a month as a reserve to help us combat those extra unexpected costs. If we don’t use the reserve, I either carrier it over to the next month, building our reserve fund, save it, or every once in a while treat us to something special.
Lack of long-term forecasting
Forecasting our budget a year in advance helps account for things that in the past I might not have remembered just moving from month to month. Car insurance payments, renters or home insurance, safe deposit box rental, certain higher expense holidays like Christmas or Easter, tax time, property tax payments (since we don’t have an escrow account), and similar non-regularly occurring expenses, even though we know they’re coming, can still come as a surprise and kill our budget. By going through the year month by month, outlining our budget and accounting for these costs, we’re prepared and our budget is ready when they arrive.
Not factoring in inflation and family expansion
Whether my own kids, new family through marriage, or friends and family’s kids, there are all sorts of costs related to family expansion. From baby birthing bills and doctor appointments, to clothing expenses, school costs, and extra food and housing costs, kids can add thousands of dollars to the family budget. And when having to buy birthday, holiday, and baby gifts for all those friends and family who are having kids as well, costs can really add up. Not only this, but with inflation in many of the products and services we utilize, expenses can seem like they’re constantly on the rise and can be real budget busters.
Again though, through the use of our reserve fund that we have built into our budget each month, and through our long-term forecasting for things like having a baby or upcoming weddings or family baby births, we’re better able to handle these costs as they arrive.
Relocations
Relocating — even just to another area in the same city — can be expensive. From the cost to rent a truck and hire a moving company or extra help, to buying packing material, start up new utilities, and of course factoring in the costs of getting set up in a new place, there can be hundreds or even thousands of dollars in additional expenses.
This is why during our last few moves we’ve done the majority of the work ourselves. By acting as our own labor, using our own vehicles, or at worst, hiring out friends and family to help us, we tend to keep our moving costs low enough that we can utilize our reserve fund (sometimes over a multi-month period) to handle them, whereas in the past, such moves might have been budget busters.
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Disclaimer:
The author is not a licensed financial professional. This article is for informational purposes only and does not constitute advice of any kind. Any action taken by the reader due to the information provided in this article is solely at the reader’s discretion.
