Many expenses that blow people’s budgets and eat into their savings are predictable occurrences. The precise amount and timing may vary but the occurrence is very likely, so build an allowance for them into your cash flow plan.
Bills that recur every month aren’t typically the problem, because we can easily recall these when creating a budget.
It’s the expenses that are a bit further out that are easily overlooked in your budget spreadsheet.
These predictable yet overlooked expenses tend to fall into the following categories:
- Infrequent essentials and comforts
- Lifestyle maintenance
- Life events
Infrequent essentials and comforts
Infrequent essentials and comforts are those expenses that occur at least once per year, but not every month. For example:
- Car registration and insurance
- Home insurance and council rates
- Personal insurance
- Sport membership renewals
Lifestyle maintenance are those expenses that occur every few years but which we typically consider essential to maintaining our lifestyle. For example:
- Car upgrades
- Replacement of major electrical items such as mobile phones, computers, TVs, washing machines and refrigerators
- Furniture replacement
- Home rejuvenation including painting, flooring, window dressings, kitchen and bathrooms
Life events are almost like life goals. They’re things we really hope to be able to do and achieve during our lifetime. For example:
- Buying a home
- Getting married
- Starting a family and having parental leave
- Further education
- Career change
- Starting self-employment
Since the experiences and expenses in each of the categories are somewhat predictable it makes good sense to save up and earn interest, rather than borrow and pay interest. Doing so will help you get off the debt merry-go-round and be financially fit.
When you’re first getting control of your spending the above list can be overwhelming. Begin boosting your financial fitness by regularly setting aside money for your predictable infrequent expenses. Even though the precise amount and timing of the expense may vary it is better to save some toward it then have to tighten your belt the month it occurs.
Next, layer in savings plans for your more probable and nearer-term life events, progressively expanding your outlook as you feel more in control.