Planning your financial life with a budget is one of the best things you can do to get on the right financial track. Budgeting is considered to be a learning process. Budgeting is an important tool that helps individuals properly account for their income and utilize their money wisely. However, during the course of the month, there may be expenditures that come up which were simply not included in your spending plans. This is why the monthly budget should always be revisited and updated. Below listed are some expenditure that are likely to be overlooked.
Some unexpected or forgotten expenses are usually the culprits behind financial shortcomings. Here is a list of the most important expenses you have probably forgotten to plan for and how they can easily bust even the best of budgets:
- Eating out
Most people remember to put groceries in their budget. Food is essential to survival, but they either bulge the eating out and grocery category together or do not budget for eating out at all. If you do eat out even once a month you need to include this item in your budget. Lunches at work may need to be broken into a separate category as well. Breaking down where your food money is going will give you more control and motivation to limit your spending in these categories. If you realize that you are spending a N8,000 a week on your work lunches, you may decide that packing your lunch is worth the saving you will receive.
- Entertainment Costs
A night out at a bar, or going to the movies with your friends should definitely be part of 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. You may need to cut back to one or two nights out a month and look for less expensive alternatives.
Even if you are not a shopping freak, chances are there are certain items you will need to purchase throughout the year. 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.
Calculate your annual spending on all clothing and accessories and divide that amount by 12 to determine how much you should be putting aside each month.
- Small Spending
This is spending that you do on a regular basis to help you get through the day. For some people it may be a trip to your the coffee shop on the way to work each morning. Or it may be a trip to the convenience store for a bottle of coke and candy bar on the way home or during your lunch break. It may be the extra book you buy each week for your commute or the airtime your purchase everyday. You do not usually budget for this because the spending amount is small usually less than N500, but it can add up quickly if you are doing it on a daily basis. You do not need to stop this type of spending all together, but you should include it in your budget so that you can figure out how much you want to spend on it each month.
- Unexpected medical expenses
Setting aside money to get your eyes checked or your annual physical won’t, unfortunately, keep you from getting sick or having accidents. If you have got health insurance a large percentage of the cost of these unexpected trips to the doctor or emergency room will be covered but not all of it. You should have money set aside either in a Health Savings Account or checking account to cover the extra co-pay and prescriptions that follow.
- Household supplies
A lot of people like to squeeze household supplies like toilet paper, toothpaste, and cleaning supplies into groceries. Some say that you can’t eat toilet paper so they don’t take this stuff out of groceries.
- Annual Payments
Another financial area that causes problems for many people are the payments that are due once or twice a year. In the initial budget you may just forget to include it in your budget, until you are presented with the bill. Another common thing you may forget is annual home taxes, 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. You should also set up a category to cover irregular spending like the cost of attending a friend’s wedding or gifts. This can help you set up an annual budget that actually helps you reach your financial goals.
Do you take an annual vacation? Travel twice a year to visit family for the holidays? Set aside money each month for any travel-related costs such as airfare, hotels, meals, rental cars, and souvenirs.