âPeopleâs estimates tend to be off by about 20 percent on where their money goes,â 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. âIâve never seen someone be surprised at their mortgage payment or rent payment or car payment,â she says. âEveryone knows what those big items are. It really is the small things or the infrequent things that tend to get overlooked.â
Subscription fees and automated purchases
Annual fees
Fluctuating costs
Holidays and gifts
Ancillary travel costs
Remember when you subscribed to that streaming service in lockdown which you havenât used in months? Or registered for the weekly meal delivery kit when you couldnât get to the supermarket that you can never seem to find the time to prepare?
ÂŁ30 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 youâre 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: âIf possible, donât set a subscription up on auto-renew. Just unclick that box and then youâll get an email or a notification when itâs about to expire, and thatâs a great way to evaluate, âIs this something Iâm using enough to justify the expense, or not?ââ
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.
âItâs anything that you donât get a monthly bill for that tends to be the issue,â 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 ÂŁ200 annual fee and staying on top of a more manageable ÂŁ17 monthly payment.
The key is planning. Craigie says, âIf you project forward, you begin to see patterns. ⊠You can see that your car tax is due next month, so donât eat out or youâll be behind.â
âProjecting forwardâ 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 wonât be any surprises when they occur.
âIt makes people much more aware of their money choices and upcoming expenses,â Craigie says. âItâs harder to think I have money left over when I look at the budget and see some expensive months coming up.â
Accounting for seasonal holiday costs â all the money youâll spend on travel, gifts, and food over Christmas â are a major part of building a rugged budget.
But donât 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 âhow many grandchildren they have, or if they have a particular niece or nephew whose life theyâre very involved in ⊠if thereâs five people on that list and you typically spend ÂŁ100 on each of them, thereâs ÂŁ500 thatâs just for Christmas.Â
âThey also will have a birthday, now weâre up to ÂŁ1,000. Do you buy anybody else gifts? Do you have any kids that are going to graduate from kindergarten?â
Each of these are factors to consider.
While weâre all travelling a lot less nowadays, travellers may also find budget surprises in ancillary travel costs, Duffy says.Â
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 donât come back to bite when you return home. For Duffy, it all comes down to staying âspecific about what we spend our money on.â
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, thereâs 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 yearâs 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.