A Deep Dive into Household Budgeting - Part Two
Welcome to Part Two of our Household Budgeting review. If you need a refresher, you can read Part One right here. If you need a TL;DR (too long; didn’t read) breakdown: adulting is expensive, and it’s important to prepare yourself by developing a comprehensive budget.
We’ve covered buying a home, saving goals, insurance, retirement, auto loans, and more. I’ve even given you tips on breaking down monthly bills so you can easily manage your budget. Last week we went over the emergency fund and housing expenses. Now we’re going to dig deeper into some of the individual line items of the Household Budget Worksheet. If you haven’t had time to look at it, I would suggest you hop on over and take a peek. Even if you already have a budget sheet, you can still get some useful tips from this one. And if you don’t, stop whatever it is you’re doing and make this your top priority!
Housing
I’ve already told you guys about some of the costs associated with being a homeowner. Your monthly payment, for instance, will be more than just principal and interest. You can see on our budget worksheet, we list HOA fees, repairs and improvements, taxes, and insurance. You might notice that taxes and insurance have been itemized in your bill each month, but knowing what you pay, and where it is going gives you an advantage when shopping for better rates. This shopping power should extend to other providers, as well. I even recommend you have multiple credit unions (as long as we are one of them!)
Utilities
Sure, you might not always have a say when it comes to your electric, gas company, or water/sewer providers, but this does not mean that you are stuck with all of your utility companies. Your phone, cable, and internet provider(s) should routinely upgrade their features to improve quality and expand their service area. Use this to your advantage to score a better deal or improve your existing plan. Some companies still pay off an existing contract to earn business.
Household Upkeep
You might not think about the small purchases you have to make when you are living on your own, but every dollar adds up. The point of making a budget is to consider each expense, however small, to plan for their impact on your finances. You know that at some point you will need to replace a light bulb (in my case, they always seem to blow out at once…anyone else?), air filter, smoke detector batteries, and a host of other items – you might as well plan for it. The same thing goes for pest control and lawn service. Neglecting upkeep may cost you more in repair down the road. If you can swing it, it’s always better to stay ahead of things with simple (often inexpensive) routine maintenance.
If the thought of listing a $10 pack of light bulbs on a budget spreadsheet seems ridiculous, think of it this way...When facing financial hardship, that $10 will mean a lot if you don’t know when your next meal will be. Defining your monthly expenses can help you determine areas where costs can be cut during an emergency.
Transportation
If you’re like most Americans, you are probably paying a car payment (or two) that eats up $200, $300, $400, or more of your paycheck each month. It would be hard to forget about those payments in your budget, but do you plan out your gas and insurance expenses, too? Pay attention to how often you fill up and list the total in your spreadsheet. The same goes for insurance. This can come in handy when you are pricing new cars – you can quickly determine if you’ll be saving money or paying more when you get behind the wheel.
Repairs/Maintenance
Whatever you drive, you’re going to be spending money on preventive maintenance regularly. Your new car may come with free oil changes, but surely, you will need to cover new tires at some point.
How about commuters? Have you done the math in how much your tolls and parking cost each month?
*Bonus Tip: An E-ZPass can save you a bundle if you (like me) have a daily toll to pay.
What about your satellite radio subscription? Most new cars have that as an option, and if you’re a Howard Stern fan (Baba Booey!), you’ll be paying an additional cost on top of your basic subscription. To those of you who rely on alternate transportation, you’ll still have to pay for bus or subway fare, taxis, or Uber costs.
Debt Repayment
One of the other common heavy-hitters to your budget is debt repayment. You probably have a credit card (or two, or three) that you are making payments on, or maybe you are paying back student loans? You guessed it, add it in that budget. Even if you pay off your credit card balance each month, plan on including a minimum monthly payment in your budget line item in case something happens, and you need to carry a balance over from the previous month.
As a side note, I wouldn’t be doing my job if I didn’t take a second to talk about our VISA Rewards Credit Card. If you don’t have one, I highly encourage you to get one. It boasts one of the richest rewards structures you can find all at an affordable cost. If you’re interested in applying, you can do that right here in just a few minutes. Okay, job security has been handled, so let’s keep on moving.
Personal Care
Personal care is an often overlooked area of one’s financial responsibilities. Whether you go to the salon once a year or once a month, you’ll want to consider those costs, as well as what you spend for new clothing, shoes, and dry cleaning.
Looking to cut back a bit? A trip to the barber would run about $28. If you go every six weeks, that’s $224 each year. Pushing that visit back to every eight weeks instead would save you $56 per year. That’s extra cash you can put towards paying off your debt. I know it doesn’t sound like a lot of money, but every bit that you can sink into paying off debt puts you one step closer to living debt-free and having more in savings.
Food
Whether you live to eat or eat to live, one thing is for sure...you will always have food expenses. Don’t forget to consider the costs of school lunches, your morning coffee, or if you are like my husband, the vending machine at work. Shopping for sales, couponing, and using rebate apps can help you save money, too. You won’t get rich off of them, but in my book, saving money is always a good thing.
If you have the willpower, consider trying out a $40 per week (or another amount that is reasonable to you) meal plan. It’s a challenge, but even testing it for one week can mean big savings. I tried it recently and loved having some extra cash on hand. I found this to be practically impossible to maintain for any length of time, but it did make me more cognizant of my spending habits and helped me to plan meals, stretch our resources and be more creative with ingredients – which has lasted far longer than just one week. I’m still saving money consistently, so I will consider it a win.
Pets
Everyone loves their pet, but boy do the dollars add up. If you already have a pet, you’ll be familiar with these expenses, but if you’re considering expanding your family, don’t forget to think about food, medications, grooming, and boarding. Pet insurance is also a good idea because, at some point, you will be responsible for a hefty vet bill. Ask me sometime about my cat with the radioactive iodine treatment to combat overactive thyroid. It isn’t cheap.
Insurance
Speaking of insurance, if you are like 55.7% of Americans, you’re receiving your health, dental, and vision insurance through your employer. You might also have additional coverages, like life and disability insurance. But, what if you have additional premiums from private insurance providers? Be sure to list all of them in these line items. Not only is it a breakdown of your financial obligations, but if something happens to you, your loved ones can easily find the benefits to which they are entitled.
I’m going to cover the remaining line items in the next post, so stay tuned. As always, if you have comments, suggestions or feedback, you can email me directly. Happy budgeting!
Krista Kyte is a personal finance blogger and personal banker with over 17 years of experience in the financial industry. Krista is passionate about helping our members understand their financial situations. She writes tips that will help consumers reach and maintain financial security, and start living the life they’ve always wanted.
