So, we've got all the grocery bills under control and all the regular bills are at the cheapest price but so often what undoes a budget are the irregular expenses which we forget to budget for. These are expenses that only come round once a year or that we have failed to predict. Expenses like big festivities such as a wedding or a car service or even buying gifts for a regular event like the holidays.
We need to ensure that our budget takes these events into account or else in the month they occur we are going to find ourselves coming up short. The thing to do is to look back at all the unexpected spending last year and tot it up. Looking at bank and credit card statements can be helpful for this. You don't even need to work out categories if you don't want to, just look at which months you were overspent in and jot down how much. Once you have a total, add a certain percentage for price increases this year, say 3% and then this gives you the total you should have in your 'Unexpected Expenses' column in your budget. If you divide the total by 12 that will tell you how much you need to be saving into this account each month.
The 'Unexpected Expenses' account is not for Emergencies, that is a separate account and if you don't keep then separate you will have nothing left for a real crisis ! Forgetting that the car is die a service this month is not a real emergency but being left at the side of the road because a wheel fell off the car after the service is ! This actually happened to a pupil of mine yesterday ! Fortunately, her family do have an Emergency fund and it paid for towing and a hire car until the garage that did the servicing can fix the car and pay compensation.
We'll talk some more about Emergency funds next week !