A useful budget doesn't only cover housing costs, bills and the things necessary to a happy existence, it should also put something aside for everyday incidentals, those little things that can add up to big money. Creating a budget that takes into account the money you spend at the salon, catching a movie or grabbing lunch, can save you accounting headaches and keep your finances in line.
Create and complete a family budget planning sheet that identifies where every dollar goes and what's left over. You can download a budgeting sheet online or make your own by listing your expenses and your income. List all fixed and elective spending for the past month including incidentals such as late night snack runs, magazine subscriptions and your everyday pocket money. With your expenses clearly listed, the amount you have available for incidentals will be easier to figure.
Analyze how you spend your pocket money and why, then calculate the average you'll need to cover all your incidentals. Build your budget for the next month with the figure you've arrived at in mind. Start the budget with essentials like rent, utilities and food, then move into the incidentals category and plan your spending day-to-day based on past experience and your own spending habits. Write down your expectations and keep track of your spending every day to see if they match up with reality throughout the month.
Set aside a portion of your income as pocket money for day-to-day planned expenses and the incidental expenses you incur along the way. Limit your incidental spending to cash only. This will ensure that you do not overspend your allotted budget and will hold you immediately accountable for every expenditure. When you use a credit card to cover incidentals you can end up with an unexpected bill at the end of the month and an interest charge until the balance has been eliminated.
Adjust your budget calculations if the month does not go according to plan. If you have any special events or seasonal changes in budget that may affect your incidental spending, factor them in ahead of time in your projected budget. Good planning can eliminate surprises and keep things running smoothly.
- Consider reducing the amount of money you divert toward retirement plans and other long-term investments if you find the budget is getting a little tight. You can revisit these optional expenses once things have gotten to a more manageable place.
- A failure to prepare for incidental expenses can land you in unnecessary debt and throw your entire financial plan off its path. The interest you will incur by borrowing to cover incidentals is often many times more than the expense itself.
Robert Morello has an extensive travel, marketing and business background. He graduated with a Bachelor of Arts from Columbia University in 2002 and has worked in travel as a guide, corporate senior marketing and product manager and travel consultant/expert. Morello is a professional writer and adjunct professor of travel and tourism.