The easiest way to fail on your personal budget is to not plan. That’s it – that’s how to fail. Or, maybe you plan but your plan fails you. To have an effective plan it all starts at the same point – making sure you have the correct personal budget categories included from the get-go.
Hear me out – if you have budgeted 100% of your money and then something crazy comes up, like say a flat tire – what do you do? Well, you have three choices:
- Reduce a different category by the same amount as your flat tire repair
- Pull from your emergency fund for something that I honestly don’t consider to be an emergency
- Simply go in the hole. You didn’t budget for it and now you’re going back into debt and throwing this on a credit card
#1 is obviously the best option but it’s still crappy. What if it’s the last day of the month? You don’t have anytime to spend less in the other categories so you’re likely going to have to select option #2 or #2.
This can all be completely alleviated if you were to just have the proper personal budget categories from the get-go! That’s all it takes! Then you can properly allocate your income to each section that is relevant to you.
But you can only properly allocate them if you have a budget planner that is going to allow you that flexibility, and that’s why I think that the Doctor Budget is the best budget planner on the market.
Not only does it allow you to be flexible (because life isn’t static, right?), but it forces you to actually track each purchase so you truly know where your money is going.
That might sound taxing, but I can track and entire month of spending in just 15 minutes – it’s really not that bad! I think that spending 15 minutes on your budget each month is the perfect amount of time. Anything more and you’re not going to do it; anything less and you’re not actually going to learn where that money is going!
A lot of personal budget categories are obvious like mortgage/rent, groceries, gas for your car, student loans, etc., but many of them are not obvious! So, what are these magic personal budget categories that everyone forgets?
Well, let’s get started on them!
- Car maintenance
I figure we can go ahead and start with car maintenance since this is a topic that I briefly discussed above. There are a lot of things that might come up in your life including oil changes, flat tires, car accidents, battery replacement, the list goes on and on!
Of course, you can do some simple preventative maintenance that will help minimize these costs but that doesn’t change the fact that these costs are still going to occur if you have a car.
Personally, I don’t have a car maintenance expense most months, but I budget for it every single month. I put $50 in for my budget every single month and when I get to the end of the month and have spent $0, I then will transfer $50 into my Ally high-yield savings account and let it sit.
I have the ability to classify different amounts of money into different buckets which can help keep it all organized.
Pretty cool, right? This way, if I go 3 months without having an expense and I now have a $400 expense, I have already saved $150 in unused funds. I think this is a great way to really make sure you’re not only being prepared but also planning ahead for that unexpected expense!
- Travel costs
This can be anything from hotels, Airbnb, extra food costs, airfare or more gas in your car, souvenirs, anything! Anything that is associated with traveling can be thrown into this category. Sure, you can always beef up some other categories to include the extra costs such as gas for your car or the food, but a lot of these are specific to travel.
Maybe you travel a lot and think that airfare should be its own category – do it then! Nothing is stopping you from making your budget your own.
I use the same philosophy with travel costs that I do with car maintenance by saving for the future. This way, you can save $200/month and go on a $2400 vacation at the end of the year. Or maybe a few long-weekend trips throughout the year!
The options are meaningless as long as you’re planning and are prepared.
- Medical bills
This is one that might be a bit surprising to people when they hear me say it (or read me write it ?). I am the BIGGEST fan of the HSA because it has a triple tax advantage so I will always be sure to max that out each year. But, if I use that money early, then I’m really only getting two of the tax advantages of contributing pretax money and then using pretax money – I’m missing out on the growth aspect!
The growth aspect is huge, so I will always try to just let this money sit and keep growing if possible.
But if I am letting the HSA sit, then that means that I will need to be prepared to pay my bills when they occur! There is a pretty big lag between doctor bills and when they’re actually due, so I will usually input them into the next months budget after I receive them. If it’s a major unexpected bill then I will use my HSA in a worst-case situation, but I really do try to avoid this.
If you don’t have an HSA or don’t want to ever tap into it, then I recommend you maybe budget for something near your out-of-pocket max and then just save any unused funds as I have talked about above!
- Seasonal activities
I honestly forget about this one every single year. Two major ones for me are golf in the summer and NFL Sunday Ticket in the Fall. I will try to golf twice/month at $50/round meaning I am spending about $100/month during the summer in golf.
When I use Doctor Budget, I will just copy the tab from the previous month and then make edits, meaning that I might miss having golf because February becomes March, then March is April, then April is May and before you know it, I never included golf and then spend $100 in a month!
NFL Sunday ticket is also something that I love and since I am a student, it costs me $100/year to watch all the NFL games, but I know it can be $300 for most other people.
Think about what expenses you might have on a seasonal basis and be sure to include them! Maybe it’s ice skating, going to an amusement park, going to a brewery/winery every Thursday in the summer, anything! Anything focused around a seasonal activity needs to be included even if it’s not its own separate category.
“Andy – what the heck. Misc.?”
This is a HUUUUGEEEEE one for me and it should be for you too. Every single month I will budget about 5-10% into Misc. It can be these random one-off purchases that don’t actually justify having a category. Having a Misc. category can allow you to stay in budget without having to perfectly identify every single expense before it happens.
Then, after a few months, you can go back and look back at some of your misc. expenses and see if they justify their own category now. Maybe that $4 parking fee twice/week for every week should be a new category of “parking”.
Trust me – you’ll thank me later.
- Extra debt payments
I have found from personal experience that if you do not budget for extra debt payments, you will not make extra debt payments.
Plain and simple.
Start small with $50 and just keep knocking out some of that very high interest debt like a credit card. Personally, if the APR on my debt is 6% or less, then I won’t pay extra on it and instead will invest it, but that’s just me!
And that leads me to…
Ah…my heart. Investing. We all love it.
Similar to debt, if you don’t plan for this then you’re likely not going to actually set aside money. It’s just how we are wired.
Now, another way to get around this is to simply have some of your paycheck go straight into a different investing account before it even hits your bank account, and that’s how I do it, but if you’re going to manually move money from a checking account into an investment account, you better make it a budget item.
Or you can wait 6 months and look back to see your investing account still at $0. At least that’s what happened with money-blowing Andy (yes, I am talking about myself lol).
It sounds stupid, but I pay $51 for trash every 3 months. Not a huge deal to pay $17/month but $51 every 3 months is weird. So, I will do the same thing as I’ve noted above and put $17 in an account each month.
Maybe it’s so small that you don’t want to worry about it and would rather just pay the $51 – that’s fine. Just make sure you’re accounting for it and planning in your budget calendar.
If you live in a major city, you know how annoying this is. You might pay $40 /month or so (I did in Chicago) so while that’s not a ton, it’s something that you need to plan for.
My advice? Aim high. Plan for the highest you’ll spend and then when you come in under, you’re going to be very, very happy!
- Annual Expenses
These ones are the worst! They’re so common though and can include things like:
- DMV Fees
- Amazon Prime
- Other subscriptions
- Car insurance
- Tax Preparer
The key, again, is to be prepared. You can either save money each month and put it into a high-yield savings account but I prefer to just use a budget calendar and make sure I know that expense is coming.
Then, the month the expense comes, I will put it into my Misc. and pay it off with ease because I planned.
You see how that Misc. category can come in handy?
This is a big one! Birthdays, Christmas, Valentines, Mother’s/Father’s Day, anniversaries, and just because gifts (as well as everything else that I missed). These can KILL you. They did for me.
I tend to overspend on gifts so it was tragic for me when this would happen and I didn’t plan.
Learn from my mistakes and take my advice!
This is one that can be very, very painful to forget. Don’t ever get in a situation where you have to choose to not donate because you forgot to plan for it – that would be the worst!
Instead, think about your donations and the timing of them. Maybe it’s an annual donation to an organization or a weekly donation to a church. No matter what it is, think ahead and plan!
- Home Improvement
This one is pretty obvious. It can be a new bathroom, floors, landscaping, a new driveway, anything! Any sort of project that you want to do to keep your home in great condition is something that has to be considered.
You don’t want to find yourself in a spot where you have to choose to overspend your budget or not address something that is a glaring need to fix right now. No Bueno.
Oh, and similar to many of the others, I recommend having this in your budget every single month and then just saving the excess!
- Home Goods
Not to be confused with the Home Improvement this is more so focused on anything inside that you want to add that might not add value to the actual home, such as new furniture, pictures on the wall, new bedframe, anything in that realm.
My wife can get going on kicks of redoing rooms and this is something that I always have to reel her back in on. But she usually just says something like “well stop spending $100/month on golf” and honestly, I usually just shut up and get back on my way!
- Non-Emergency Big Purchases
I’m going to brag really quick – this is a true Pro Tip.
I have a “NEBP” which stands for Non-Emergency Big Purchases catch all (think similar to the misc.) that I put money in monthly in case something comes up that’s not an emergency but still expensive. I have an emergency fund but I take a special pride in not touching that, so when things come up like needing a new set of tires on the car or a new AC in July (both of which occurred last year) and I can pay for them without touching the emergency fund, I feel ecstatic.
It’s taken a lot of planning and dedication to get to that point but you can as well! It can really help you segregate expenses from just being a big, unexpected purchase and an emergency. To me, an emergency is losing a job, massive medical bills, etc. The other things are just NEBP!
My last piece of advice is to look at your old spending. You can download your transactions online and get a general feel for the things that you spend a lot of money on and this can help you out!
Maybe it’s going to the movies, gambling at the casino, or even expenses for you to write your own blogs – you won’t know until you look for yourself! And it’s so easy to download those transactions that I really make it the core of Doctor Budget, and that’s why it works!