The key to building your savings is budgeting. Properly planning how much money you make against how much you need to spend each month shows you without any doubt what is left to play with. This alone can tell you if you can buy that silly expensive leather jacket or if you are taking from your planned long term savings goal. While it sounds pretty straight forward there are some things you should budget for that are often overlooked.
The most common expenses people forget to account for in a monthly budget are annual, semi-annual or quarterly expenses. While these may not be due in the next month they are still an expense for that month. Make sure you divide the payment required by the number of months it covers and spread it across your budget.
While most people account for monthly petrol they forget to allow for some sort of maintenance that the car will need. You could account for just your annual service but it is better to look at how much your car maintenance cost last year and account for that plus a little more, just in case.
Children’s extracurricular activities
You should create a calendar that details what extra activities your child will take part in for the year. Then you can account for it each month. If your child does violin practice for $20 a week in the winter but takes part in a camp for $200 a week during the summer, you should be able to plan ahead to avoid struggling in the summer months.
Set money aside for any unforeseen health costs for you, your family and your pets. Don’t be unprepared when something goes wrong, have the money ready.
Special events and miscellaneous
It sounds silly to budget for the unknown. This may not need a special category but it is important that when you look at the long term savings figure you don’t think of it as just the retirement fund. You will likely need to use it at some point for unexpected expenses. Consider this if you are putting some of your savings in long term higher yield accounts that don’t allow you to touch them for a certain period of time.