2843: 8 Important Things That Are Missing from Your Budget by Kumiko of The Budget Mom on Budgeting Tips

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[00:00:40] [SPEAKER_00]: This is Optimal Finance Daily, 8 Important Things That Are Missing from Your Budget

[00:00:45] [SPEAKER_00]: by Kumiko of TheBudgetMom.com. And I'm your host and personal finance enthusiast,

[00:00:51] [SPEAKER_00]: Diania Merriam. Now let's get right to it as we optimize your life.

[00:01:00] [SPEAKER_00]: 8 Important Things That Are Missing from Your Budget by Kumiko of TheBudgetMom.com

[00:01:07] [SPEAKER_00]: It happens all the time. You're a couple months into your new budget and then all of a sudden

[00:01:13] [SPEAKER_00]: you've blown it. You're sitting there wondering where your money went and how you didn't see

[00:01:17] [SPEAKER_00]: this coming. You need to set yourself up for success from the start, and that means

[00:01:23] [SPEAKER_00]: making sure you're including these items in your budget.

[00:01:26] [SPEAKER_00]: 1. Gifts Budgeting is all about planning. It's vital that you plan ahead

[00:01:33] [SPEAKER_00]: and include gift giving in your budget. You need to be aware of upcoming birthdays,

[00:01:39] [SPEAKER_00]: holidays, and special occasions. They happen like clockwork and you need to have money set

[00:01:45] [SPEAKER_00]: aside to cover the costs. No, I don't mean pulling the money out of savings. How much did

[00:01:52] [SPEAKER_00]: you spend on Christmas gifts last year? Are there birthdays that you spend money on,

[00:01:57] [SPEAKER_00]: time and time again? To determine the amount you need to set aside monthly,

[00:02:02] [SPEAKER_00]: you need to investigate your spending habits from the previous year.

[00:02:06] [SPEAKER_00]: To figure out reoccurring birthdays, get a good idea of how much you spent on holiday gifts

[00:02:12] [SPEAKER_00]: last year and total the amount. Then divide the total paid by 12 to get a monthly budget amount.

[00:02:20] [SPEAKER_00]: 2. Clothes If you have children, this is an essential item that needs to be

[00:02:26] [SPEAKER_00]: included in your budget. They wear an outfit once and then they outgrow it by the next week.

[00:02:33] [SPEAKER_00]: Seasons also change and they'll need new clothes for school. That doesn't mean you can forget

[00:02:38] [SPEAKER_00]: about yourself. You need to account for necessities like undergarments and socks in your budget.

[00:02:43] [SPEAKER_00]: When it comes to purchasing clothes in bulk like back to school clothes,

[00:02:49] [SPEAKER_00]: look at your total spending by going through old financial statements for the last 12 to 18 months.

[00:02:55] [SPEAKER_00]: That'll give you a good idea of how much you spend annually and you can spread the cost over

[00:03:00] [SPEAKER_00]: 12 months. You will deposit this amount in your clothing cash envelope.

[00:03:06] [SPEAKER_00]: 3. Home Maintenance Owning a home can be costly.

[00:03:11] [SPEAKER_00]: Things break and need to be replaced. The lawn needs upkeep and flowers need to be replanted.

[00:03:17] [SPEAKER_00]: Are you budgeting monthly for these expenses? Keep in mind,

[00:03:22] [SPEAKER_00]: even if you don't own a home, you still need to be putting money aside monthly.

[00:03:26] [SPEAKER_00]: I live in an apartment and I know all too well about needing money for house maintenance

[00:03:31] [SPEAKER_00]: like the new vacuum I bought last week. Here are some common home expenses.

[00:03:36] [SPEAKER_00]: 4. Insurance Home or renters

[00:03:39] [SPEAKER_00]: 5. Taxes Furnishings or window treatments

[00:03:44] [SPEAKER_00]: Even in an apartment you need to have privacy. Utilities

[00:03:49] [SPEAKER_00]: Maintenance and repair like my new vacuum. Pest control

[00:03:54] [SPEAKER_00]: Garden and lawn care Sewer and trash service

[00:04:00] [SPEAKER_00]: There are many different ways to budget for maintaining your home.

[00:04:03] [SPEAKER_00]: Some people swear by the 1% rule which suggests that 1% of the purchase price of your home

[00:04:09] [SPEAKER_00]: should be set aside each year for ongoing maintenance. I'm not a fan of this method.

[00:04:15] [SPEAKER_00]: Each home is unique. The market where you bought your home makes a difference

[00:04:19] [SPEAKER_00]: and there are many different independent variables.

[00:04:22] [SPEAKER_00]: The best way to budget for home maintenance is by taking inventory of the things that

[00:04:27] [SPEAKER_00]: might need to be replaced and dividing their value by 12.

[00:04:31] [SPEAKER_00]: That's the amount you need to save each year. How much did you spend on lawn care last year?

[00:04:37] [SPEAKER_00]: You need to set money aside monthly to cover those expenses.

[00:04:41] [SPEAKER_00]: My rule of thumb. Save enough money to make you feel secure.

[00:04:46] [SPEAKER_00]: If you know your roof is old and needs to be replaced in a couple of years,

[00:04:50] [SPEAKER_00]: get an estimate and start saving money monthly.

[00:04:53] [SPEAKER_00]: Worried about an appliance breaking? Set enough money aside that allows you to

[00:04:58] [SPEAKER_00]: sleep better at night.

[00:05:00] [SPEAKER_00]: Number 4. Medical Expenses.

[00:05:03] [SPEAKER_00]: Budgeting for your monthly premiums isn't enough.

[00:05:06] [SPEAKER_00]: There are always items that aren't covered by insurance.

[00:05:10] [SPEAKER_00]: Copays and deductibles can add up and it can put a strain on your budget if you aren't prepared.

[00:05:16] [SPEAKER_00]: Make sure you're adding regular dental and doctor visits to your calendar and plan accordingly.

[00:05:22] [SPEAKER_00]: Number 5. Memberships and Subscriptions.

[00:05:25] [SPEAKER_00]: If you're a member of Amazon Prime or Costco,

[00:05:29] [SPEAKER_00]: you have a yearly membership fee you need to plan for.

[00:05:33] [SPEAKER_00]: Save monthly for these expenses by taking the annual membership fees and dividing by 12.

[00:05:39] [SPEAKER_00]: Don't forget to include things like magazine subscriptions, gym memberships,

[00:05:44] [SPEAKER_00]: or box services like food services or health and beauty subscriptions.

[00:05:49] [SPEAKER_00]: Number 6. Entertainment Money.

[00:05:52] [SPEAKER_00]: Just because you're creating a budget doesn't mean you can't have fun while doing it.

[00:05:57] [SPEAKER_00]: If you completely deprive yourself while trying to spend less and save more, you will fail.

[00:06:03] [SPEAKER_00]: The truth is, you can still do the things that you enjoy like going to the movies,

[00:06:07] [SPEAKER_00]: enjoying a date night, or traveling. You just have to plan for it.

[00:06:12] [SPEAKER_00]: This is where you get to decide what's important to you.

[00:06:15] [SPEAKER_00]: Consider setting some money aside each month so you can do the things that matter

[00:06:19] [SPEAKER_00]: without going into debt or busting your budget.

[00:06:23] [SPEAKER_00]: Number 7. Pet Supplies.

[00:06:26] [SPEAKER_00]: Pets are part of the family, at least in my home they are.

[00:06:30] [SPEAKER_00]: We're in love with our guinea pig, Penny, but she's expensive.

[00:06:34] [SPEAKER_00]: She's only the size of my hand, but she eats like she's the size of a dump truck.

[00:06:39] [SPEAKER_00]: Make sure you have food, toys, and grooming included in your monthly pet costs.

[00:06:44] [SPEAKER_00]: It's easier to keep track of your pet expenses if it has its own category.

[00:06:48] [SPEAKER_00]: This also makes it easier to see if you can afford to add a new furry friend to your family.

[00:06:54] [SPEAKER_00]: And number 8. Haircuts and Beauty.

[00:06:58] [SPEAKER_00]: If you're like me, quality is always more important than price in this category.

[00:07:03] [SPEAKER_00]: I'm willing to spend a little more for my hair appointments, as long as I know

[00:07:07] [SPEAKER_00]: it gets done the way I want it to and the products they use are high quality.

[00:07:12] [SPEAKER_00]: I get my hair done about every 6 months, which is fewer than most.

[00:07:16] [SPEAKER_00]: I do have highlights, but one way I save money is by keeping my highlights close to my regular

[00:07:21] [SPEAKER_00]: hair color. This allows me to go longer in between hair appointments without worrying about grow out.

[00:07:28] [SPEAKER_00]: How often do you get these services done?

[00:07:31] [SPEAKER_00]: I spend about $100 every time I go to the salon, which is about $200 every year.

[00:07:37] [SPEAKER_00]: I take that amount and divide by 12.

[00:07:39] [SPEAKER_00]: Sometimes I'm not sure when I need to go in, so I'll budget my money a couple of months prior.

[00:07:45] [SPEAKER_00]: For example, I usually know I need to go to the salon a couple of months ahead,

[00:07:50] [SPEAKER_00]: so I will set aside $50 every month for 2 months to cover my hair appointment.

[00:07:56] [SPEAKER_00]: Don't forget to include things like nail polish, massages, or special beauty products.

[00:08:06] [SPEAKER_00]: You just listened to the post titled 8 Important Things That Are Missing From Your Budget

[00:08:10] [SPEAKER_00]: by Kamiko of thebudgetmom.com and I'll be right back with my commentary.

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[00:09:18] [SPEAKER_00]: When you first start budgeting, it could seem like expenses keep sneaking up on you and

[00:09:23] [SPEAKER_00]: derailing your budget. But this is likely because they aren't regular monthly costs.

[00:09:29] [SPEAKER_00]: Certain things come up once per year or not on a regular cadence

[00:09:33] [SPEAKER_00]: so they don't fit neatly into your monthly budgeting exercise.

[00:09:38] [SPEAKER_00]: Many people will track one month of spending and create a budget from there, which is a good start

[00:09:43] [SPEAKER_00]: for sure. But as you get better with financial planning and money management, reviewing an entire

[00:09:49] [SPEAKER_00]: year or 18 months of spending will give you a more accurate picture of your financial needs

[00:09:55] [SPEAKER_00]: and the various expenses you want to get ahead of with budgeting.

[00:09:59] [SPEAKER_00]: I also think a solid emergency fund can help with this.

[00:10:03] [SPEAKER_00]: While certain expenses do seem to hit you out of nowhere, we all know they're lurking in our

[00:10:08] [SPEAKER_00]: unseen future. So in a way, we can expect the unexpected. You can plan for the unexpected

[00:10:15] [SPEAKER_00]: with an emergency fund and not feel bad about paying for the surprise vet visit or new car

[00:10:22] [SPEAKER_00]: battery because this is in your budget in the form of an emergency fund. I've read a lot about

[00:10:28] [SPEAKER_00]: sinking funds for future expenses, so for example, a car maintenance fund or a house maintenance fund.

[00:10:35] [SPEAKER_00]: But personally, I've just always kept a stash of money in a savings account to pay for whatever

[00:10:40] [SPEAKER_00]: might come up. And that'll do it for today. Have a great day and rest of your weekend,

[00:10:46] [SPEAKER_00]: and I'll see you tomorrow as usual where your optimal life awaits.