“People’s estimates tend to be off by about 20 percent on where their money goes,” says Carol Craigie, 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, director of Bridge Financial Planning, 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.”
Subscription fees and automated purchases
Holidays and gifts
Ancillary travel costs
Remember when you subscribed to that streaming service in lockdown which you haven’t used in months? Or registered for the weekly meal delivery kit when you couldn’t get to the supermarket that you can never seem to find the time to prepare?
£30 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. Apps like Mint and Yolt gather all your subscriptions in one place, either manually or by crawling through your bank data for recurring charges using open banking.
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?’”
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 your credit card annual fees, membership dues, car tax, and TV licence into your budget in advance or setting aside a separate monthly account for them can mean the difference between being blindsided by a £200 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 car tax is due next month, so don’t eat out or you’ll be behind.”
“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 vet visits to rising summer energy bills and new tyres on your car. 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.”
Accounting for seasonal holiday costs – all the money you’ll spend on travel, gifts, and food over Christmas – are a major part of building a rugged budget.
But don’t just save for the festive season or your big annual holiday! Birthdays and other celebrations like weddings or baby showers should be accounted for as well. Budget accordingly for gifts and travel expenses.
Thomas Duffy, CFP, president of Jersey Shore Financial Advisors, 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.
While we’re all travelling a lot less nowadays, travellers may also find budget surprises in ancillary travel costs, Duffy says.
You may budget for flight, hotel and food, pesky expenses like airport parking 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.”
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 an online home budget calculator, like the one provided by the Money Advice Service, can really help with wrapping your head around your total income and outgoings. You might even prefer to sit down with a financial adviser and go through last year’s bank and credit card statements to gain a real sense of your spending.
It's also worth seeing if your bank has a free app to use. Technology means you can now track all your accounts in one place which makes it a lot easier to keep track of your budget. You can usually set short and long term savings goals too.
Mistakes still happen, but putting time and effort into your spending plan now can help ensure no surprises set you back in the future.