San Diego Financial Literacy Center

Ten Expenses to Remember When Creating Your Budget

When setting up a budget, some expenses are hard to forget, like your mortgage or rent, car payments, or cell phone bill. Though these expenses are obvious, there are others that are often overlooked. Forgetting expenses can have a drastic effect on a perfectly balanced budget.

Below we go over 10 expenses that you want to include in your budget, so they don’t surprise you when they come up:

  1. Emergency Fund – If you don’t have money set aside for an emergency, consider adding that to your budget. Having money set aside in savings will give you peace of mind. If unforeseen expenses were to arise, you’d have money to cover them without having to resort to credit cards. Consider making it your goal to save three-to-six months of expenses, so when something unexpected comes along (like a job loss), you will have peace of mind.
  2. Car Insurance The way people pay for car insurance varies. Be sure you’re aware how your insurance company requires you to pay your premium. Some car insurance companies will allow you to pay your insurance premiums on a monthly basis, allowing for easy budgeting. If you pay your premium quarterly, twice a year or annually, remember to divide the payment by the amount of months, so you can budget monthly and are not short on funds when the bill comes.
  3. car maintCar Maintenance –  If you own and drive a car, you know that at some point the car will require maintenance, possibly tires, brakes, or a new battery. It’s hard enough to budget for car ownership since gas expenses are hard to calculate accurately, but what about those less common expenses? After all it could be years before you need new tires. Along with other emergency funds, set aside a fund for car maintenance. Having money saved will reduce the risk of having to fall back on a credit card when maintenance is required. For tires, find out how much new tires will cost you and start setting money aside for that purpose. Don’t wait to start saving until the metal wires start showing on your current tires.
  4. Vehicle Registration –  Every year we have to pay for our state vehicle registration. Depending on the state in which you reside and the type of vehicle that you drive, registering your car can be expensive. Along with renewing vehicle registration, some states require you to pay for added tests. For example, in California, if your car fits in certain guidelines, you’ll need pay for a smog check every few years.
  5. Holidays The holiday season is months away, so it’s easy to forget to add it to your budget. The summer may be a good time to start saving for the next holiday season. Starting to save for the holidays months in advance will reduce the amount of stress that the expenses will have on your budget when the time comes to start shopping.
  6. Back-to-School Shopping – If you have school-aged kids, you know back-to-school brings added expenses. If you know your children will need new clothes to head back to the classroom this fall, don’t forget to add that expense in to your budget. Calculate how much money you’ll need and start saving months in advance.
  7. Taxes – Depending on your personal situation the end of the year and the subsequent tax season may bring with it an added expense. Regardless of the reason for having to pay back money to the IRS, financial stress resulting from it can last long after the April 15 deadline. If you’re wondering whether or not you’ll have to pay money back at the end of the year, talk to a tax professional and be proactive. If you anticipate you’ll have money to pay in to the IRS, start budgeting ahead of time.
  8. Home Repairs  If you own your home, it’s important to remember that your home will need periodic upkeep. Changing a light bulb from time to time probably won’t throw your budget into a tail spin. Unfortunately, along with mowing the lawn and other small fixes, a house may require something far more extensive like a new roof or plumbing. Consider starting a new fund just for home repairs.
  9. Large Home Appliances – This one is hard to plan for because unless you have experience with these appliances, they just appear to break down over night.  Having to replace a water heater or refrigerator can be hard when trying to stay on budget. Replacing a large home appliance can be done using an emergency fund. If you have older appliances that look like they may need to be replaced soon, consider adding an appliance savings fund to your budget.
  10. Pet Expenses – When thinking of getting a pet, people tend to think of all of the good things that come along with a new pet. The problem is we forget that those cute, furry creatures can be expensive! Food, visits to the veterinarian, and medications are just some of the expenses associated with having a pet.

When calculating expenses for a budget, it’s important to try and remember everything. Forgetting to add something to a budget in the early stages can cause it to fall apart. A previously unplanned expense can lead to credit card debt and financial hardship. To help avoid this scenario, be sure to add any of the above expenses that apply to you.

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