I used to associate the word “budget” with being broke. Or not having much money. When I heard the word budget, it was in the context of “We’re on a budget” as in “We are trying to save money,” so I always thought it meant to be financially struggling. I remember going into a home décor store in college saying I needed to decorate my room, and the sales associate asked me what my budget was. “No budget” I said. That was my way of saying “It’s not a particularly tight budget” but instead I said I didn’t have one at all.
Now I know that even the wealthiest of people keep budgets. In fact, that could be why they’re so wealthy. To keep a budget just means to be intentional about your spending, and to do so because you have certain savings goals in mind. Anybody, of any income level, can and should do that. When you do sit down to make a budget, you may be confused because, each month, you’re saving less than you hoped. What happened? You stuck to the budget! Sort of…It’s important to get very specific with budgets. When you keep them vague, you run into trouble, and justify extra spending because the categories bleed together. Here are categories to have in your budget.
When we talk about roof-over-head expenses we talk about the expenses that dictate whether or not you get to remain in your home. If you own your home, those are Home Owner’s Association dues, home insurance, property taxes, and mortgage payments. Defaulting on any of those can put your housing at risk. Keep in mind that your mortgage lender may seize your property if you default on taxes or insurance.
These are the utilities you need to live, like your water and power bills. Really think about your usage. If you have a water heater inside of your home, think about that cost. Your thermostat usage. Your dishwasher. Your washer and dryer. People often underestimate what these utilities will cost, and wonder where the savings went.
Additional add-ons and repairs
Then there are the things that aren’t imminent to your survival, but they come up: those add-ons and repairs. You need a new desk chair because the old one gave out. You want some new fake plants. You need to fix that sink lever that’s old and gets stuck. These little things can take hundreds out of your bank account each month.
Media and in-home entertainment
This is your Internet bill. Your cable bill. Your subscriptions like Netflix, Hulu, HBO GO, Amazon Prime, On Demand, and Showtime. Your landline if you have one. Each of these seem small but they can quickly add up to a couple hundred dollars a month – easily – if you have them all.
We often don’t pay attention to how the out-of-home entertainment expenses add up. But, they do. You want to go to the botanical gardens or some museum. It turns out that parking is $20 and it’s mandatory to park on site. You go to a friend’s play. Tickets are $12. You attend a concert in the park and there’s a suggested donation of $10. You may think of the big things like concert and movie tickets, but those small, unexpected entertainment expenses sneak up on you.
What about when you go to an event and will be drinking? You take an Uber, Lyft, or Cab. Those costs add up quite quickly, too. Or you get a friend to give you a ride and offer to pay for the gas. Or you split a limousine with friends to a wedding. Maybe you take the metro sometimes, and pay for a monthly pass.
Payments to keep the car
These payments are the absolutely essential payments you must make if you don’t want to have your car repossessed. These are your car payments, whether you lease or own. And it’s your car insurance. Keep in mind again that if you default on your insurance, the insurance company may report that to your lender, who may repossess the vehicle.
Payments to maintain the car
These are the payments that, though they aren’t entirely critical, they are important, and they come up regularly. Gas. Car washes. Oil changes. A little extra for the unexpected like a flat tire or low fluid in your window wipers. If you have to regularly pay for parking, you can add this to the category.
Pet supplies, non-medical
If you have a pet, you may not realize what you spend on Fido there. He’s worth it, but you need to account for him in your budget. Food. Poop bags. Toys. Grooming. Daycare. Nail clippers. Treats. Clothes (hey, we don’t judge). New beds when they chew up the old ones. Cleaning supplies for accidents.
Medical-related pet supplies
These can be monthly, too, as well as yearly or quarterly. Pet insurance (get it). Heartworm preventative medication. Flea prevention. Teeth cleanings. Vaccines. Checkups. Vitamins. Medications. Some pet insurance plans offer wellness additions to help cover these basic expenses, and are well worth it.
This is one that often messes us up. We calculate all of our expenses. We know exactly what’s going out the door each month for the essentials, and the things we enjoy. We deduct that from our net income. And we should be saving a bit so…why aren’t we? Aaah. Debt. Student loans. Business loans. Personal loans. Credit card debt. When creating your budget, one of the first things you should do is bundle all of your debt, deduct that from your net income, and that’s your real take-home each month. Now set your budget.
Think of all of the little things you do to keep yourself healthy and in good shape. There’s the big one, health insurance, but what about all the small stuff? The toothpaste, floss, floss threaders, face wash, feminine products, vitamins, gym membership, ear plugs for a good night’s rest, laundry detergent, orthotics…the list goes on and on. You have a lot of things you do to keep yourself healthy.
Those personal splurges are nice, but it’s important to keep an eye on what you spend on them. We can forget that they are regular expenses, and they aren’t free. Those mani/pedis. Maybe for you its sheet masks. Or getting a facial or massage. It may be the occasional spa day, or some very pricey bubble bath. Maybe it’s getting waxed. Or having your eyebrows threaded.
Groceries is a big one. But sometimes we miscategorize food items. Groceries should be seen as basic ingredients you buy to make your own meals, mostly from scratch. You eat multiple times a day, every day, so if you can find how to trim this budget, you could see major savings. Maybe it’s about switching to generic or buying big tubs of rolled oats instead of the microwavable packs.
Out-of-home meals deserve their own category. One can make the mistake of combining all food into one category, but out-of-home meals are much pricier. Making a sandwich can cost about two or three dollars while buying one from a deli can easily be 10 or 11 dollars after tax and tip. Any meal you don’t make at home, whether that’s fast food, take-out, delivery, or dining at a restaurant, goes into this category.