Every budget is a work in progress. Even the most disciplined, savvy budgeters can find themselves surpassing their spending limits because of unexpected expenses.
“People’s estimates tend to be off (by) about 20 percent on where their money goes,” says Carol Craigie, MA, ChFC, CFP, managing partner and financial coach with Fiscal Fitness Clubs of America.
The danger, according to experts, lies in budget-conscious consumers forgetting to account for smaller items like subscription services or occasional costs like annual fees and gift purchases.
Jennifer Harper, CFP, director of Bridge Financial Planning LLC, warns against these variable line items. “I’ve never seen someone be surprised at their mortgage payment or rent payment or car payment,” she says. “Everyone knows what those big items are. It really is the small things or the infrequent things that tend to get overlooked.”
Make sure you account for these five expenses to ensure your spending plan’s accuracy and to maximize your savings.
1. Subscription fees and automated purchases
Remember when you subscribed to that streaming platform you haven’t used in months? Or registered for the weekly meal delivery kit that you can never seem to find the time to prepare?
$29.99 per month sounded like a great deal then, but with weeks or even months of disuse, that money can quickly go to waste.
Even if you do use your subscription services regularly, their automatic payment processes make them easy line items to skip over in a budget plan.
If you’re the sign-up-and-forget-it type, online trackers and apps can help. Web services like Truebill and apps like Bobby and SubscriptMe gather all your subscriptions in one place, either manually or by crawling through your bank data for recurring charges.
Harper offers another solution: “If possible, don’t set (a subscription) up on auto-renew. Just unclick that box and then you’ll get an email or a notification when it’s about to expire, and that’s a great way to evaluate, ‘Is this something I’m using enough to justify the expense, or not?’”
2. Annual fees
Often, we think of budget items month by month, which works for fixed expenses like a mortgage or phone payment. Fees that appear only once per year, however, can feel like an unwelcome annual surprise.
“It’s anything that you don’t get a monthly bill for that tends to be the issue,” Harper says.
Folding items like credit card annual fees, membership dues and vehicle registration renewals into your budget in advance or setting aside a separate monthly account for them can mean the difference between being blindsided by a $199 annual fee and staying on top of a more manageable $17 monthly payment.
The key is planning. Craigie says, “If you project forward, you begin to see patterns. … You can see that your license tags are due next month, so don’t eat out or you’ll be behind.”
3. Fluctuating costs
“Projecting forward” can also help with fluctuating monthly costs that are difficult to anticipate and, therefore, often left out of budgets.
These expenses include anything from veterinary visits to rising summer utility bills and oil changes. Take time to examine what the realistic costs will be over the course of an entire year, and there won’t be any surprises when they occur.
“It makes people much more aware of their money choices and upcoming expenses,” Craigie says. “It’s harder to think I have money left over when I look at the budget and see some expensive months coming up.”
4. Holidays and gifts
Between parties, gift exchanges, food and travel, leaving seasonal holiday costs out of your budget can make even the most generous year-end bonuses feel like pennies.
But don’t just save for December holidays — birthdays and other celebrations like July Fourth and Labor Day should be accounted for as well. Do you have a wedding or baby shower to attend in coming months? Budget accordingly for gifts and travel expenses and set aside dedicated funds in a high-yield savings account.
Thomas Duffy, CFP, president of Jersey Shore Financial Advisors LLC, says budgeting for these items takes thoughtful consideration.
Consumers should take into account “how many grandchildren they have, or if they have a particular niece or nephew (whose life) they’re very involved in … if there’s five people on that list and you typically spend $100 on each of them, there’s $500. That’s just for Christmas. They also will have a birthday, now we’re up to $1,000. Do you buy anybody else gifts? Do you have any kids that are going to graduate from kindergarten?”
Each of these are factors to consider.
5. Ancillary travel costs
Travelers may also find budget surprises in ancillary travel costs, Duffy says. While they may budget for flight, hotel and food, pesky expenses like airport parking, gratuity and travel insurance can add up to an unexpectedly high total.
Set a spending limit that includes estimates for these ancillary costs so they don’t come back to bite when you return home. For Duffy, it all comes down to staying “specific about what we spend our money on.”
How to stay on track with your budget
With so many individual items to account for each month, how can you ensure your budget is accurate without giving in to budget burnout? According to the experts, there’s no quick fix.
Using a worksheet like Bankrate’s Home Budget Calculator to project forward expenses for the coming year or simply sitting down with an adviser and going through last year’s bank and credit card statements to gain a real sense of your spending are smart ways to prepare.
“Some categories like home and car repairs have to just be ‘guestimated’ and balances of savings carried over for a couple of years,” Craigie says.
Mistakes still happen, but putting time and effort into your spending plan now can help ensure no surprises set you back in the future.
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