Over the years, I've become quite adept at budgeting. Starting as a college freshman has given me plenty of time to get a good feel for all the little quirks and bobbles that can come along with creating and maintaining a budget. And one thing that I've learned during this time is that there are always those little hiccups that arise that I just wasn't expecting even though I'm a great planner and budgeter. That's why I've gradually made adjustments to my budget over time and incorporated what I've learned over the years to help smooth out those budgeting bumps I inevitably come across from time to time.
All Those Lonely Extras…Where do They all Come from?
It's like no matter how hard I try, there are always little items that pop up that I just wasn't expecting. They could be smaller things like the $30 annual parking permit for the car or the vehicle emissions test, to things like the $100 annual safe deposit box fee, student activity fee for our son, car insurance or whatever. And even if I managed to put them into the budget and get them in the right month, it seems like I'm never quite caught up with all of them.
Therefore, I've recently taken a new approach to this aspect of extras in our budget.
Working Extras into our Budget
So after years of being frustrated at these constant budget surprises -- be they big or small -- I figured out a good way to compensate. While this step doesn't necessarily stop the surprises from coming, it does help me handle them when they arrive.
What I've done is factor a little extra "fat" into my budget each month. It might not be much money -- maybe just $50 or so -- but it's enough to catch many of those extras that come along. But I don't just leave it at this, since $50 isn't all that much. There's a second step to accounting for these budgeting hiccups.
Developing a Long-term Plan
Since my surprise costs come along with regularity and really never end, and $50 isn't very much each month to account for these costs, I put the second and longer-term step of my budgeting plan into action.
This step helps me plan for those bigger costs that occasionally arrive. Each month, if I used my $50 of wiggle room for a surprise extra, then fine, it's gone. However, if I don't use it or use all of it, it gets carried over and added to the reserve amount for that month. The same thing happens with this amount -- or whatever is left of it -- at the end of the next month, and so on and so forth. This means that I have kind of a rolling, snowballing reserve fund that allows me not only to catch some of those smaller costs that pop up but be prepared for the larger ones as well. And at year's end, any extra money disappears in a cloud of budgeting smoke (it doesn't get spent), and I start all over again come the new year.
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The author is not a licensed financial professional. The information provided in this article is for informational purposes only and does not constitute legal or financial advice. Any action taken by the reader due to the information provided in this article is solely at the reader's discretion.
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