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Predictable expenses are something that you should already have included in your budget. If you aren’t, read on to see why planning for these is crucial to add them!
Predictable expenses are fixed expenses (with and without variable costs). You know that they are coming. You know that you’ll have to pay them eventually, and you know that they are unavoidable.
There are two types of expenses
Predictable and unexpected
Unexpected expenses can range from anything to everything. A trip to the emergency room is an example, but with an emergency fund in place, it’s not as hard of a blow to the budget. Saving money for the emergency fund should be considered a budget line item until it’s complete.
Predictable expenses are your normal bills including:
- Child support
- Debt obligations
- Auto loan payments
- Personal care
- Pet care
- And more!
You know you have to eat, and you know you have to pay your bills. Those are pretty much the basic rules of being an adult.
Your rent doesn’t jump out and scare you once a month, you know what amount is due and when it is due weeks in advance. Often, it doesn’t change without a few weeks of notice as well. This gives you plenty of time to plan.
Most of your predictable expenses are for the same amount of money and will run on a schedule. This makes it much easier to add to your predictable expenses to your monthly budget.
There are a few things with varying costs throughout the month, but this doesn’t remove them from the predictable category.
Regular grooming costs, costs for new toys, food, flea control products, registration, vaccinations/medications. Pets can get expensive to own, so making sure that you add them into the important predictable expenses helps to ensure that you can afford to give them the proper care they need.
Of course, unexpected medical expenses can occur as well, so pets can easily fall into unexpected expenses as well.
You know you’re using electricity and water, so you know you’ll likely have to pay those bills unless they’re bundled into some payment plan deal with rent or you live on a well. But for this article, we’ll assume you pay both.
Electricity bills and water bills are pretty easy to budget for, even with their varying costs. To do this, look at your past usage for the previous year (if possible) and figure out what amount you were using and paying this time last year. Also, look at the year a whole and find the average amount you paid per month.
You can find the average by adding up all of the payments and then dividing by the 12 months in the year. After you know this amount, you can budget for it, you may be off by a few dollars by the time that the bill gets here, but you should remain pretty close most months.
Knowing how much you’re using and spending is also great because then you can look at ways to conserve energy or to reduce your water usage. This can save you money in the long run too!
So not that you’ve got a better understanding of the fixed monthly predictable expenses and the varying expenses, let’s look at the random occasional predictable expenses that happen throughout the year. These are the things that you pay once or twice a year, maybe less.
Unexpected predictable expenses
Like the oxymoron?
Here are a few examples of these expenses:
- Car registration and renewal
- Drivers license renewal
- Insurances (if you pay them at once instead of monthly)
- Oil changes
- Car repairs and maintenance
- Business related licenses/memberships
- Home repair (if you’re a homeowner)
If you drive, you already know that you need to renew your license every few years and you also know exactly when they are due (hint: happy birthday). With forethought, you can budget these months in advance if you’re getting close to needing a new card.
While most individuals will get a refund back, many end up paying. People without credits like my parents can claim 0 for maximum withholding and still end up owing a few hundred dollars every year.
Taxes vary per person and situation and no set rules can be applied to everybody like a blanket answer but if you know that you’ll likely owe taxes, set up a savings account and start sliding money aside every month to help reduce the painful punch to your wallet at tax time.
Car repairs and maintenance
You know your car will need gas, oil changes, new tires, brakes, alignments, and so on. While there are some people out there that will buy a new card every time it is time for regular maintenance (yes, I know people like this) it’s still a predictable expense.
Having a sinking fund for your car maintenance is a great way to be able to afford repairs as soon as the check engine lights pop on, instead of playing fast and loose with the game of risk.
Holiday and birthdays
I see this one a lot, something comes up and there’s no money for Christmas or you can’t even afford a cheap birthday party at a cheap local birthday venue. But, similarly to your rent/mortgage bills you know when these dates are coming looooonnnnggg in advance and there is no way that they should be jumping up unexpectedly.
Birthdays and (most) holidays don’t change. Easter hops around like a bunny, so finding ways to save money on Easter is always understandable.
But budgeting for Christmas, or throwing an affordable Thanksgiving, or finding a meaningful gift for mom in May, should be planned for (or at least expected) months in advance.
Why your random predictable expenses should have a sinking fund
A sinking fund is like a savings account set for specific reasons and usually with a goal amount to save in mind. This is completely different than an emergency fund!
Having small savings accounts for your birthdays, holidays, home and car repairs are great for budgeting purposes. By setting aside a little money every month, you can budget easier. This is a great way to be smart with money this year!
Think about it, would you rather pay $100 per month into these sinking funds or pay $1000 at once because your car died on the highway going 70mph while you were rushing to work and you needed a tow?
Now you’d have missed a day of pay and been hurting for cash had you not had the proper foresight to plan for these accidentals and been able to afford proper car maintenance months before so that things like this couldn’t happen.
Planning for predictable expenses is key to frugal living and living with less stress. Knowing what’s coming and preparing for it keeps you in control of your money and your life. Having the proper financial motivation to get started and keep going is the best way to reach your financial goals.
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