Underestimating or worse, missing an expense, can spoil your spending strategy altogether. Unfortunately, with each passing year, budgets are becoming tighter as the rise in income don’t follow the rising costs.
1. Common Big Expenses
To increase the odds of handling your budget, experts recommend breaking it down.
These costs will vary significantly depending on where you live. According to the Department of Labor, the average household spends about $1,674 per month on housing, taking the largest portion of the average monthly income of $6,553.
Adding to your rent or cost of housing is the expense of utilities that includes electricity, gas, water and cable. This cost also depends on where you live as Hawaiians pay the most, at $731 per month with Idaho residents bringing it down to $344 per month.
Everyone’s got to eat. This figure will also vary significantly depending on whether you eat out or cook, with most spending approximately $660 per month on groceries and eating out from time to time. The less Starbucks Caramel Macchiatos you get, the lower the figure will be.
This cost will vary depending on whether you have a car and what is your daily commute. If you have a car, you need fuel along with accounting for its insurance and care.
Health insurance has a price tag, along with doctor visit co-pays and non-prescription medication.
Saving for college drives the expenses significantly up. Even if you or your kids are in public school, you still need to account for supplies, field trips and other fees.
Student and credit card debt repayments can take a significant chunk of your income and wellbeing so make sure you follow through a repayment plan to stay on top of your finances.
If you have a pet, you need to account for his or her food and care. A gym membership can be $60 per month or more. Then there’s shopping. The average U.S. household spends $155 per month on apparel, according to the U.S. Department of Labor. As for the fun stuff, this is highly personal as you know yourself best so make sure you include all the activities you will splurge on.
Keeping three months’ worth of expenses on hand will be your safety net when tough times come, such as the period we’re in with skyrocketing unemployment rates. This figure can seem intimidating, but as long as you have the right strategy, you can manage it.
2. How To Budget and Save
To begin with, an efficient savings strategy requires that you treat savings as a priority expense and that means not leaving it as optional. As long as you devote a specific amount to save, you will get your creative juices flowing to find new ways to save money.
Make your home more energy-efficient
Energy-efficient upgrades such as adding another layer of insulation or installing LED light bulbs can help save a lot for money on your monthly Oncor Energy bill.
Adopt energy-efficient habits
Turn off the lights when you leave a room. Wash your clothes in cold water when you can and only when the washer is full. Let the sunshine in when you need to heat up the place and put blinders down when you need it to stay cool. During winter, dress with the occasions with a ton of layers and blankets before turning up your thermostat.
Cook instead of eating out
Often, we are tempted to eat out because we don’t feel inspired to cook or what we do cook ends up tasting bland. Well, all you have to do is Google your favorite recipes and discover a whole new magical world with a ton of free tutorials that will make you into a Chef in no time.
The same goes for coffee: instead of daily trips to your local coffee shop, buy a Nespresso machine that can make you any Italian coffee you want every morning and pay for itself over two months.
Adopt the second-hand mindset
These days, there is an online second-hand market for everything: from Levi’s jeans to luxury items. A lot of the items look brand new and have barely been used. If you think about it, not only do you get to pay a smaller price but also have a guarantee that the good in question is durable.
Takeaway – Expenses can seem scary. The more you put aside for big expenses, the less scary they’ll be as you will have everything under your control. That is the trick of healthy finances: to stay on top of your expenses as opposed to letting them become your master.