In today’s informed times, it is pretty common knowledge that you should have some kind of a budget. At the very least it seems to be a common sentiment that you should not spend more than you earn — although to be honest, I am not sure everyone got the memo on that one.
In my line of work, I often get to see the ins and outs of people’s financial situation, including their budget. I often find that there are some pretty big expenses that are just not accounted for.
So even if you have the best budget, if you aren’t accommodating the following 5 expenses, you are likely dipping into your savings anyway.
Gifts
Think about all the friends and family that you buy gifts for throughout the year. Birthdays, Christmas, mother’s and father’s day, anniversaries and weddings. I would be hard pressed to find someone who never had to buy a gift throughout the year, yet I rarely see an allocation towards this in the budget.
Typically, I like to loosely figure out how many people I need to buy for throughout the year for birthdays and Christmas, then decide how much I am likely to spend on each person. Once I have an annual figure, I then put away money each pay period into a ‘gift fund’ so that I know there is money there when I need to buy gifts. Even if you have a small family, this can add up to thousands over the course of a year and if you don’t have the money set aside for it, you’ll be dipping into your savings (or credit card) to pay for it anyway.
Clothes
Some people do set aside money for clothes, but often people don’t and just buy them ‘ad hoc’. Sometimes we don’t know exactly how much we will need to spend on clothes throughout the year, but again setting aside a sum of money each pay period will mean you have the money when you need it.
This also might help those who like to spend a little too much on clothes, to stay within the budget.
Doctor visits
We don’t plan to get sick or injure ourselves, but unfortunately trips to the doctor are a fact of life. We have no idea how much we may or may not spend in any given year, but if you have no buffer to pay for a random trip to the doctor, medication or an appointment with your physio, where do you think the money will be coming from?
Even with health insurance and Medicare, you will likely have a gap to pay, so having a few thousand dollars a year set aside for medical emergencies is a smart decision. For most families I will recommend $2,000 a year as a basis.
Holidays
I often find that people don’t factor holidays into their budget even though they intend on taking them. Many people try and save every penny in the lead up to a holiday instead of making it apart of their ongoing budget. I am a huge advocate for holidays but I will set aside money for this in every pay period, even if it is only a small amount. This is an expense like anything else and should be built into your budget, especially for those who plan on having yearly holidays.
Car servicing
Most people allocate money for car registration and insurance but typically they don’t set aside money for car servicing. If you drive your car regularly you will likely need a service at least once a year. Eventually with any car you are going to need new tyres, a wheel alignment or new brake pads. If you don’t have a little ‘car service kitty’ available to you, you might be scratching your head wondering how you are going to pay for this, or worse you will put off the service for as long as possible all the while doing further damage to your car.
Not servicing your car regularly will cost you more in the long run, so having yearly money set aside for regular services is a must.
Most people will have these 5 expenses in their life, so it makes sense to set aside money for them. Remember, a budget is just a plan for where your money goes. By being extensive and realistic you will be more successful with your money management.
When you need to go to the doctor, or Christmas rolls around, you’ll have the money available and you can spend without guilt.
