Creating an annual budget is a great way to start the year. You can set financial goals and come up with a plan to reach them, but unexpected costs can derail your meticulous budget planning.
“We can get too focused on day-to-day expenses and overlook the larger, less frequent bills until they show up in our mailboxes,” says Kendal Perez, a savings expert for Coupon Sherpa. Creating a comprehensive annual budget is a smart way to turn surprise expenses into planned-for costs you’ve got covered.
Here are some of the most commonly overlooked expenses to make sure you include in your annual budget.
1. Long- and short-term savings
A budget should include money to reach both long- and short-term saving goals. “Include a line item in your budget for your financial goals such as retirement, savings account, college education for children, etc.,” says Harrine Freeman, a finance writer and expert on debt management.
As you plan out your budget, saving is also important to ensure that you have the cash on-hand to cover costs that crop up. “By contributing regularly to a savings account, the funds can be used to pay for unexpected expenses such as vacations and repairs,” Freeman says.
2. Financial service charges
It’s important to consider the costs of managing your money. Some of these expenses are simple, like “bank fees, out-of-network ATM fees, or overdrawn bank account fees,” Freeman points out. Proper budget planning and tracking can help cut some costs, like overdraft fees.
But there are other fees worth looking at, too. For instance, consider fees and charges for retirement accounts and investments. If you get professional help to manage your finances or file your taxes, include your advisor’s fees in your annual budget.
Make sure you don’t get caught off guard by a tax bill that you can’t afford to pay.
If your income or filing status has changed since last year, revisit your paycheck withholdings to ensure they are correct. Self-employed earners or those with a side income will need to spend extra time budgeting for taxes (which are often due quarterly).
4. Out-of-pocket medical costs
Among unexpected expenses, medical costs can be the most obvious — and expensive.
“Of course, it’s impossible to plan or budget for a catastrophic accident or injury,” says Jacob Dayan, partner and co-founder of tax servicer Community Tax. “But we strongly advise our clients to put in place a budget line item for medical expenses their health insurance won’t cover.”
Spend some time with your health insurance plan and estimate how often you can expect to pay for doctors’ visits, medications, new glasses or other health aids, and planned procedures.
5. Pet care
Don’t forget the annual vet visits and bills for furry members of the household, either. “Setting a reminder in your phone a month before they are due can help ensure you put the cost of the vet visit in next month’s budget,” suggests Craig Dacy, a financial coach based in Austin, Texas.
Budget for other pet care costs like specialty foods, medications, grooming, or pet sitting.
6. Home maintenance and fees
Owning a home certainly isn’t cheap, but budgeting for non-mortgage costs like home repair and maintenance will make it more manageable.
For example, “We receive our HOA fees bill every December, and it seems to get lost in the chaos of the holiday season,” Perez says. Other costs to consider include gardening and landscaping services, housekeeping services, and replacing furniture or household items.
“Home and car repairs tend to surprise people, but these are inevitable expenses you should absolutely budget for, even though they occur irregularly,” Dayan says. Consider upping this budget item if your warranties are expiring this year, as you’ll be solely responsible for those costs.
7. Vehicle maintenance and costs
Owning a vehicle also comes with costs that are too easily forgotten. Case in point: registration fees.
“This once-per-year bill is always over $100 for both of our vehicles, so it’s a bit of a gut-punch when I’m surprised (yet again) upon receipt,” says Perez. If you pay car insurance every six months or every other month instead of monthly, make sure you’re budgeting for that, too.
You can even budget for parking and speeding tickets. When I lived in an apartment with street-only parking, I averaged two parking tickets a year at around $80 each (despite my best efforts to avoid them). I added $15 a month to my transportation budget to help cover the costs, which helped take the sting out of those tickets.
8. Fluctuating utility bills
It’s also important to account for costs that might fluctuate from month-to-month, like power and gas. “The air conditioner runs more during the summer, the heat during the winter,” says Cherie Lowe, personal finance blogger at Queen of Free. “This makes it more difficult to set a specific amount for these categories of spending.”
To offset these costs, set a budget equal to the most expensive bill you got for that utility in the past year. Then, in months where it ends up being cheaper, “use the extra that might not be used toward debt or a savings goal,” Lowe suggests.
9. Event and holiday hosting
Annual budgets can be particularly helpful for catching one-off expenses, like special celebrations and holidays.
“Most of us plan for birthdays and the big holidays like Easter, Christmas, and Valentine’s Day, but many of the smaller celebrations get overlooked,” Lowe says. This can include a Super Bowl bash or summer cookouts.
Take a look at each month and plan for the costs of gift-giving. This might include events like weddings, anniversaries, graduations, and other life events. And don’t forget thank-you gifts, such as holiday tips or gifts for Teacher Appreciation Week.
11. Donations and charity
Whether you give regularly or sporadically, a budget can help you balance your spending with your giving.
“It feels good to give,” Lowe says, whether it’s to a nonprofit or someone you know who’s in need. “Putting aside a set amount, whether for a regular donation or a spur of the moment opportunity to enrich the life of another, is smart.”
12. A miscellaneous fund
Of course, it’s impossible to anticipate and track every single expense. And at some point, it can be too draining and time-consuming to try.
“A solution that can cover all of those overlooked budget items is including a ‘random needs’ line item in your budget,” Dacy suggests. “By budgeting $100 every month for random needs, your budget won’t be thrown off when a medical bill shows up in the mail or when you forget your friend’s birthday.”
Have a budget, but need help sticking to it? Here are nine strategies to stay on track, even on the weekends.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 6.97% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.23% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at email@example.com, or call 888-601-2801 for more information on ourstudent loan refinance product.
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2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
Savings example: average savings calculated based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were disclosed. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
Application detail: 5 minutes indicates typical time it takes to complete application with applicant information readily available. It does not include time taken to provide underwriting decision or funding of the loan.
Instant rates mean a delivery of personalized rates for those individuals who provide sufficient information to return a rate. For instant rates a soft credit pull will be conducted, which will not affect your credit score. To proceed with an application, a hard credit pull will be required, which may affect your credit score.
Total savings calculated by aggregating individual average savings across total borrower population from 9/2013 to 12/2017. Individual average savings calculation based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were provided. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate||Visit SoFi|
|2.47% – 6.23%1||Undergrad & Graduate||Visit Earnest|
|2.47% – 8.03%4||Undergrad & Graduate||Visit Lendkey|
|2.95% – 6.37%2||Undergrad & Graduate||Visit Laurel Road|
|2.48% – 6.25%5||Undergrad & Graduate||Visit CommonBond|
|2.72% – 8.32%6||Undergrad & Graduate||Visit Citizens|