When creating a budget, accounting for fixed things, such as car payment or rent, isn’t that hard. However, the variable costs are the ones that are difficult to budget for. These can change each month. You can look over your spending history to determine the ones that change, and if you don’t account for them correctly, they could break the budget. Knowing how to deal with them will help you prepare for various challenges.
Plan on Saving for Monthly Expenses
Fixed expenses aren’t that hard to deal with since they do not change every month. For example, perhaps you have a $50 phone bill. In that case, you can just put $50 into that part of the budget. You could even have automatic payments going from your bank to the phone provider, preventing you from forgetting. However, if you have fewer frequent payments, you’ll want to save for those. Try setting aside money in other areas of your monthly spending, so you have enough for these fluctuations. One way of doing that is to refinance debt from school. By refinancing it into a new loan, you can often get a lower interest rate or more time to pay off the money. That way, you won’t be spending as much each month. You can use a student loan refinancing calculator to determine how much you’ll be spending with the new terms.
Non-Monthly Costs
You may only pay a few things a couple of times each year. For instance, perhaps you pay for some types of insurance ahead of time, so you don’t have to send as much. All you have to do for this is to divide the annual cost by 12 to figure out how much to set aside each month. If it varies a bit, you’ll want to put aside a bit more than you think you need.
Planning for Variable Expenses
You’ll want to do a bit of math to discover the potential variable expenses. Pick just one, to begin with, such as food costs. Then you can look over what you’ve spent over the past year or so and average the costs out. It will not be hard if you consistently spend the same amount every month, but if you only stock up on certain things every once in a while, you may have more variable costs. You can use the average price to help you figure out a realistic budget for that category.
If you have extremely unexpected costs, you may be struggling to cover them. For instance, perhaps you have an inexpensive prescription for medicine for one month. But the next time, you may end up spending even more. Try estimating the costs and averaging them out over the year. Some months you might not use everything in that category, which will make up for the times you go over. Another idea is to create an account buffer, which means you’ll leave a bit of extra in your spending account to cover these additional costs.