Budgeting is an incredibly useful way to manage your money from month to month. It helps you know where each dollar is going and stay on track for your savings goals. Even the most comprehensive budget can have some weak spots, however.
It is easy to forget expenses that don’t occur often or are very minimal. Fortunately, once you recognize that you are forgetting those expenses, you can easily add them to your budget and manage your money accordingly. Here are seven expenses you might be missing in your budget.
Payments that are due just once a year are commonly forgotten in budgets. You may forget to include the amount in your budget until the month the bill is due.
Some examples of annual payments include property taxes, car registration, and warehouse club membership fees. An easy way to budget for annual payments is to divide the expected bill by twelve and set aside that amount each month. When the bill comes, you can easily pay it because you’ve been saving for it all year!
The occasional birthday, holiday, or anniversary gift is something most people do not budget for. This is not a good habit because gifts become less occasional and more frequent as your circle of family and friends grows. Specifically, as your friends and family members start getting married and having children, you can expect to spend a lot more on gifts.
To avoid letting gifts drain your budget or put you in temporary debt, consider adding a “Gifts” category to your budget. Add up how much you spent on gifts last year and budget for a little more than that amount for the following year.
If you have a car payment, you probably already have that in your budget. Most of you probably already budget for gas as well.
What about new tires and oil changes? Maintaining a car is no small expenses. Between inspection fees and the occasional minor problems, the cost of keeping your car in tip-top shape can add up. That is why it’s important to set aside money each month towards car maintenance. This way, when the next bill comes, you can easily take the money out of your account without worrying about not having enough for your other expenses.
This category covers everything from co-pays to prescriptions to new glasses. In a given year, there is no doubt that you will have medical expenses.
Why not set aside money for them on a monthly basis so that you are always prepared? If your employer offers a Health Savings Account or Flexible Spending Account, consider taking advantage of it for the tax benefits. Whether you use an employer-sponsored account or a regular savings account, it is wise to plan ahead for the unavoidable medical expenses.
Taxes On Extra Income
If you work a full-time job, you know that your employer automatically deducts income tax from each of your paychecks. If you make any money on the side, it is your responsibility to pay income tax on those dollars. For example, if you babysit your neighbor’s children in the evenings and make $2,000 for the year, you can expect to owe about 30% of that money to the government. It is easy to forget that extra income is taxable.
The best way to remember is to keep all your extra earned income in a separate checking account. Come tax time, simply record the amount of money that is in the account and pay what you owe.
This leads into the next commonly forgotten item in budgets: tax preparation. Whether you do it yourself with online software or rely on the expertise of a certified public accountant, there is usually a cost associated with tax preparation and rarely does this cost end up in budgets.
At the beginning of each year, set aside the amount you spent last year on taxes. You can break this up into several months to make it easier on your budget. For example, if you spent $50 on tax software the previous year, you can set aside $25 in January and $25 in February to pay for filing your taxes the following year.
Having a pet adds a few additional expenses to your budget including food, toys, and grooming supplies. It is easy to overlook these costs or consider them miscellaneous expenses. Having a “Pet” category in your budget will help you better understand how much you spend on your pet each month and manage your money accordingly.
What expenses do you tend to forget in your budget?