Planning for unknowns?

[mateosbaby]

OK, my husband and I ran into a dilemma with our budgeting. How do we budget for things that we CAN'T plan for? For example, our daughter will be taking gymnastics in the New Year, but we didn't know when the sign-up would be or how much it would be. We couldn't really plan for it, especially with Christmas coming up. And what about other things that we don't know are coming up, but suddenly there they are and have to be paid within a couple weeks or so? Budgeting has been helpful for us, but we still cannot make it work (and we know that's partially our fault). My husband is starting to say, maybe we should just make a list of absolute needs, wants that are important, etc, etc. I do not want to do that, I think the budget is helping to a point, as it does help me focus on those "unknowns" that really are "knowns," I just forgot about them before so when I took the bills out of the paycheck, I knew how much was left, and spent that much (or more, usually), even though there were other things that were coming up that I could have planned for. Does that make sense? I know that's a really long sentence...

Anyway, what do you do to plan for the unknowns that certainly are not emergencies?

[coffeechick]

Here's what I like to do with my budget (keep in mind that it's just me and my cat- who thankfully doesn't spend much on her own!):

I have my givens, things like rent, groceries, utilities, etc. I spend the same amount each month.

For my "optionals," things like going out with friends, restaurants, non-necessary spending, I have a small portion that I flex. So if I got out with friends a number of times, that means I can't just buy a book. But it also gives me the flexibility if an old friend does phone me, I don't have to worry about not having the money in the budget. It's already there. It just means I have to pick and choose. My goal is to put 50% of this money into savings each month, but if it doesn't happen, it doesn't. I have other money I routinely save, too!

Does that make any sense?

[Denvergirlie]

Well then it sounds like you need to add another catergory to your budget... the unknown line ... and set aside $40 a month to handle stuff like this.

However, your case of Gymnastics is not an unknown --- you might not have fully researched the costs and times, but it sounds like you knew it would be occuring. It's not really that your couldn't plan for it, but more like you didn't plan for it.

Getting and staying on a budget will take time. Here is just one more example of not planning where your dollars are going. Don't beat yourself up over it, but do learn from this situation.

best of luck

[happydog]

Ok, it sounds like you might need some help with budget categories, so that you don't have so many unknowns. To budget successfully, you must be able to anticipate upcoming expenses, like the gymnastics lessons. Be assertive about finding out ahead of time, so that you can set aside money every month to cover these sorts of expenses, if they are a priority for you. A detailed list of categories will help you remember what is coming up, so that you can better plan for irregular obligations.

When I finally got successful at budgeting, it was because I used a fairly detailed list of categories, and set *realistic* budget amounts for them--not amounts that I'd *like* to spend, somewhere in fantasy land, but amounts that actually reflected what we spend in real life, with all its Murphy visits. Once we got a feel for where *every* penny was going, not just on a monthly basis, but on an annual basis as well, we were able to combine some of the separate categories so that our budget is streamlined and easy to maintain. The first few months or so, can be a challenge, and somewhat frustrating. Keep at it, though, because it's worth it to be able to control your money, and not have it control you.

Here's a great site with lots of budget templates to get you started. http://www.jimnkim.net/index.php?pr=Spreadsheets

Below, I've posted a list of categories that might help you see things that you are forgetting to include in your budget. I've made some notes after some of the categories, but also keep in mind that the first year you do this, you need to look at the calendar and see how many months you have before an upcoming expense will occur.

For example, my property taxes will be due in May. If I were just starting to budget, I wouldn't add up the total for last year, and divide by 12 months, and expect to have enough by May, when it is now the middle of November. You will need to adjust the number of months you divide by, for irregular expenses like taxes or insurance, until you make the first round of payments for each irregular expense. As soon as you pay out an irregular expense, recalculate, and the *very next* month, set aside 1/12 of the amount you'll need for the next annual payment. If the next payment is in 3 months, set aside 1/3 of that payment each month until it's due again. Keep doing this, and you'll have a lot fewer "unknowns". Here's a sample list of budget categories to get you started.


CHARITABLE GIFTS
Tithing
Tax deductible contributions
Not tax deductible

SAVINGS (you won't have all of these categories until you complete debt repayment)
Emergency Fund
Retirement Fund
College Fund

HOUSING
Mortgage (or rent)
Home owner's Insurance (or renter's insurance if you rent) (If you only pay this once or twice a year, add up the yearly total, and divide by 12. Set aside the resulting amount *every month* so that when that 6 month premium is due, you don't have to put it on a credit card.)
Property Taxes (These are usually paid out twice a year, in most places. Total up what your payments were last year, and divide by 12. Set aside that amount *every month* to make certain this expense is covered. If you know there is a tax increase happening, set aside extra so that you don't get a nasty surprise at tax time. This expense is non negotiable. If you don't pay, you can lose your home.)
Repairs / Maintenance (if you own a home, you should be putting money aside every month to cover inevitable maintenance costs, like a broken lawn mower or plumbing problems. Add up what you spent last year, and divide by 12. You should be putting at least that much aside *every month* to cover this budget buster. This isn't an emergency expense--it's a known expense you should be planning for every month.)
Replace Furniture/Appliances (Anticipate needs. Is your furnace on its last leg? That will set you back several thousand dollars. Is your baby outgrowing his crib? New bed on the horizon, etc.)
Home Owners Dues

UTILITIES
Electricity
Water /Sewer
Trash Removal
Phone (cell and land line, if you have both)
Gas/Oil/Wood
Cable/Satellite TV
Internet

FOOD
Grocery (and stockpile, if you do this)
Restaurants (this should be minimal until debt is repaid--it's a want, not a need.)

TRANSPORTATION
Gas / Oil
Repairs / Tires (Again, put money aside *every month* to cover at least basic maintenance. Add up what you spent last year on all oil changes, new tires, repairs, and divide by 12. Put this amount aside *every month* to cover this expense. Again, this shouldn't be an emergency fund expense, unless something really catastrophic happens, like your transmission falls out of the car.)
Car Insurance (If you don't pay monthly, add up all premiums for the year, and divide by 12, or take the amount of the next payment and divide by the number of months left until your next payment is due. Set that amount aside *every month* so that you don't have to scramble to pay.)
License and Taxes (Add together how much this cost last year, for all vehicles, and divide by 12. Set aside this amount every month, so that you have what you need, when it is due.)
Car Replacement (Get out of debt first, then decide how much you want to spend, and how long until you need to replace your vehicle(s). Divide the amount you can spend by the number of months until purchase, and set this amount aside *every month* to meet your goal. Cars don't pay for themselves, and taking a car loan is a very expensive way to purchase one, unless you find a very low or no interest loan. Not likely on a used vehicle, which is the best use of your money.)

CLOTHING (Be sure to separate wants from needs. This is a category which is easy to overspend, if you don't discipline yourself. Set aside money every month to cover this known expense.)
Children
Adults

PERSONAL
Doctors Visits/Copays
Life & Disability Insurance
Baby Sitter
Cosmetics / Hair Care
School Supplies
Lessons/Sports/Hobbies (this should include all expenses for these things, like sports uniforms, dues, lesson fees, costumes, snacks, etc.)
Gifts (Christmas/ B-days. Set aside money every month, so that major gift holidays (like Christmas) don't go on a credit card.)
Mad Money $$ (I believe Dave Ramsey calls this "blow" money. Be realistic, particularly at first. This is your discretionary spending money for the week or month, to spend on whatever you want, like a coffee out, a book, a movie, or to save for a want. Money for personal vices like alcohol, cigarettes, etc., should come from this category. These things are wants, not needs, but being too tight can result in feelings of deprivation, which is a HUGE threat to long-term financial stability. Be realistic, but also realize that you'll need to make some personal sacrifices when it comes to instant gratification of wants.)

RECREATION (You may not need this category during debt repayment. Things like movies or theme park visits should come from "blow" money until you get your debt under control. These are wants, not needs.)
Entertainment (movies, museums, sports events, concerts, etc.)
Vacation

DEBTS (anybody you owe money to, other than your first mortgage on your own home.)
Student Loan(s)
Car loan(s)
Home equity loan(s)
Other loans
Credit card(s)
Medical
Family loans
Other mortgages

INCOME TAXES
Quarterly Estimated Tax (My DH is self employed, so we pay income taxes quarterly. We budget monthly for this, so that we can painlessly pay the quarterly tax bill. We know how much is due every 3 months, so we divide the quarterly amount by 3, and save that amount each month. It's money that is already spent--it belongs to the government, so it can't be included in our spendable income.)


I hope this helps a little bit.

[Lorelei]

happydog - that was a really good explanation.

mateosbaby - budgeting gets easier over time, and there are fewer "know about, can't figure out how to budget for items". One thing that might help, as you work towards the ideal that happydog pointed out, is looking a couple of months in advance. For example, there might not be enough money to put away 1/12 (or whatever) of every expense each month since you have to pay what is coming due now. How much do you need to spend out of each paycheck? If you realize that you have $200 extra from the Nov. 15th check, but will be short $250 for Dec. 1st, you know you need to trim expenses now to cover the upcoming Dec. bills. Seeing it ahead of time makes it easier to "find" the money you need. For something like the gymnastics expense, putting in your "best guess" figure would be better than nothing. I also use a Misc. category when I budget for all the last-minute extras that seem to pop up when you have kids.

[mateosbaby]

I guess our biggest problem is that after we pay the bills and realistically plan for everything else, there IS no more money left to plan for "unexpecteds." KWIM? Yes, we can eat out less, that's always been our trouble area, but we are trying and we are getting better, even though sometimes it doesn't seem like it. :roll: But we do attempt to budget "realistically" for that rather than the ideal $40 a month type thing. We know we're bad at it, we know we're going to break the budget if we don't plan for more, so we might as well plan for it and hope we don't use it all. But after planning for everything that was mentioned by happydog and others, there IS no more money to plan for things coming up in a couple months. I try to budget extra every month for the gas/electric bill and for the water/sewer/trash bill, but sometimes I end up taking money from those to meet the other stuff we have to pay for. It's very frustrating. My dh is ready to give up a budget, per se, and just go by needs/wants, etc and watch what we're spending, but I told him the budget is working, we just need to get better at keeping with it. We are better than we were in April (we started DR in May), but we're still nowhere near where we'd like to be.

Anyway, so what do you do if there IS no more money to budget for those types of things? Oh, and btw, the gymnastics is through the city. THEY don't even know how much things will cost or when they'll be due, so it's pointless to even ask until you get the next quarter's catalog. I didn't even know when the next session would be starting.

OK, rant done for now.

[happydog]

Regarding the gymnastics, the city should be able to give you a ballpark figure, based on what previous lessons have cost. Since everything is going up in price, assume it will be slightly more than it was last year.

Regarding not having enough left over to budget for "unexpected" (what do you define as an "unexpected" expense? be specific with this...) expenses, if you don't have the income to plan ahead for stuff you know you will eventually have to pay, like insurance bills, or home maintenance, then you simply have to cut your expenses or increase your income. Many people get deep into debt through what I call a slow bleed, because they simply underestimate all the hidden costs of life. This is what happened to us too, and we ended up paying the deficits with credit cards and a home equity loan--to the tune of $38,000 over a 4 year period. ouch. Expenses like car repairs, kids' lessons, holiday gifts, are really easy to throw on a credit card--and there they sit, while the monthly interest payments slowly bleed your bank account dry.

Can you post a list of all of your expenses, so that we can help you with your budget? If you really don't have the money to set aside for upcoming expenses, then you'll need to start cutting, or increasing income. Those really are your only options.

Hugs. It does get easier, but don't be afraid to ask for help in coming up with a plan.

[ladykemma2]

I guess our biggest problem is that after we pay the bills and realistically plan for everything else, there IS no more money left to plan for "unexpecteds."

yes that is the point. after i pay for all the sinking fund (freedom account) budegtary items, as described above, there is only about 50 bucks left each two weeks. that is my spending money. it lets me know I really don't have as much money as I thought.

here is a list of my budget

MONTHLY
elec
water
nat gas
lawn
gasoline
groceries/supplies
tithe/fast offering
prescription drugs
joan lunch
credit report
phone land line
cell phone
credit card
internet
spending money

put aside monthly for the annual "big hits"
escrow (taxes/ins)
trash
home maintenance
hoa
flood insurance
termite contract
a/c heat maintenance
oil change
car maintenance
car insurance
car registration
car inspection
ez tag (toll road)
new car fund
computer upkeep
computer replacement
dr schenk
travel summer
optometrist
school startup
dentist
co-pays
vet bills
xmas
shoes

[jisaacs]

The biggest challenge I had was tracking the $ I set aside for these expences. I read on another forum that people had set up multiple savings accounts at ING Direct and had automatic withdrawls from thier checking account. This way, termites don't run off with the money left in the checking account.

We have an account for Christmas, Property Taxes, Giving, Vacation, & Annual subscriptions. We then took the annual ammount spent and divided it by the time remaining till it was due so that we are sure to have the money for it and the best part is, it's all automatic.

[Janbee]

Everyone has given you excellent advise I just have one item to add the thing that I have had to get use to is your budget is a living document that changes and you tweak it as you go. It also like wine its gets better as it gets older.

[ladykemma2]

Regarding not having enough left over to budget for "unexpected" (what do you define as an "unexpected" expense? be specific with this...) expenses, if you don't have the income to plan ahead for stuff you know you will eventually have to pay, like insurance bills, or home maintenance, then you simply have to cut your expenses or increase your income. Many people get deep into debt through what I call a slow bleed, because they simply underestimate all the hidden costs of life. This is what happened to us too, and we ended up paying the deficits with credit cards and a home equity loan--to the tune of $38,000 over a 4 year period. ouch. Expenses like car repairs, kids' lessons, holiday gifts, are really easy to throw on a credit card--and there they sit, while the monthly interest payments slowly bleed your bank account dry.

boy, that's well stated.

[Momto2Boyz]

We have a miscelleanouse catergory in our budget. In that section, I have an extra $500 per month set aside for unknowns. These are things that pop up that are necesseties (ie. we aren't allowed to use it for wants, just becuase it is set up in the budget). The idea is, we have an extra $500 cushion each month for things that come up like truck repairs, home repairs, baseball sign-up for the kids. It's for the things that I don't think of when I am doing my budget.

We rarely come close to spending much of it, but it is there when we need it. Then at the end of the month, whatever we didn't spend from the misc. category goes into the savings account.

I should add, that I do it this way, so that my budget isn't 500 miles long! If I added every possible expenditure every month, I'd have ALOT of zeros and a really long budget. I have one line of miscellaneous, with a notes section, and I just keep track of each expense in the notes. For me, this is the easiest way, without alot of clutter in my budget!

[Denvergirlie]

I guess our biggest problem is that after we pay the bills and realistically plan for everything else, there IS no more money left to plan for "unexpecteds." KWIM? .....snip.....
Anyway, so what do you do if there IS no more money to budget for those types of things?

If their is no more money in your current budget, then you need to lower your other outgoing expenses or bring in more income.

[Greebo]

If their is no more money in your current budget, then you need to lower your other outgoing expenses or bring in more income.

Or use the ancient word of power:
"NO"

Those are your three choices. Spend less, earn more, or say no.

No money for gymnastics for your daughter after the "must pay" expenses? "I'm sorry honey, but we can't afford it right now." (No). It really is an option. Many of us here heard it many times growing up, and it never killed us.

Your kids won't die either. They'll just sound like they're about to for a while...

[Mochashello]

If you have $50 left every 2 weeks ($100 per month) and you are using that as your pocket money, then you could make the sacrifice for 2 months straight to cut that in half and put aside the rest toward gymnastics. You don't have to know the dollar amount to know that it won't be free.

I'd also say that the word "realistically" can be twisted to mean "how much we want to spend" when planning on how much you budget for eating out. Ask yourself if that is what you are doing. And when you budget a certain amount, don't just spend extra anyway. Remember, if you are spending money beyond what you budgeted, you are spending money that belongs to something else. I always think that way. If you spend an extra $10 on dining out, you just spent $10 of your daughter's gymnastics money or $10 of your electric bill or something. It has to come from somewhere right? Try retraining your brain to think this way and it should help you stay within budget on discretionary items. Hope that helps.

Sometimes there are one-time costs that necessitate budget cuts elsewhere to make happen. That is why it is called a living document, as another poster mentioned.

Ok, I have to also share this. You would be surprised how much money you can find in your budget if you know it is temporary. For example, my daughter's pet rat has developed a tumor. The rat cost us about $15 last Christmas and it's not exactly on the same level as my dogs are in my heart. However, my daughter LOVES her rat. So... I had to take her to the vet- office visit $30. I skimmed money from the grocery budget (I budget that on a monthly basis so it's not like taking $30 from one week's worth of money). The tumor is benign but will cost between $80 and $125 to remove depending on how much anesthesia they need. My mom flipped out that I was even considering spending that on a rat. But if I'd had a rat when I was 11, I'm sure she would have figured out a way to take care of this problem too. She just forgets how important your kids' feelings are to you in situations like this. Anyway, I didn't schedule the appointment yet. Not until I could come up with the money. But I don't want to put it off too long either because the bigger it gets the harder it is to remove (& therefore it would become mroe costly). I looked ahead at the next paycheck and I skimmed money from several sources- a bit from groceries, a bit from our "blow" money, a bit from gasoline even (I tend to over-estimate that to be safe anyway), and a bit from what I call the "discretionary"- which is simply more blow money that is for family things rather than personal blow money. We have to do it that way because my hubby is a spender and I am a saver and everyone is happier if we just separate the blow money and ask no questions of each other. I had just about balanced it- and believe me I was surprised!- when my son came down with pink eye and I had to pay $25 to take him to the dr and pay for meds. So now I am off again. But anyway, I didn't mean to go off on a tangent about my rat, I just wanted to give you an example of how you CAN find money in your budget for something like the gymnastics or something that wasn't anticipated ahead of time. Because until you are really good at budgeting, you WILL fail to anticipate everything.

I suggest you add a simple category to your budget- a "slush" fund of sorts- for just this sort of thing. You probably don't have $500 like the above poster, but I KNOW you can come up with $40 or so. This should build up since you (ideally) shouldn't have unanticipated expenses every single month. I KNOW you could find $10 to trim from groceries per month (that is only $2.50 per week!), $10 from dining out, and cut your fun money from $100 to $80. These are tiny adjustments that add up and I am confident anyone can do it.

The last thing you want to do is scare off your husband by making budgeting unapproachable and over-complicated before you are both ready. If you can't anticipate EVERYTHING, then at least anticipate that there will be things you didn't anticipate, lol. If there is no money at the end of your budget, change your budget so that there is. Dave Ramsey has baby steps in place for a reason. It's manageable. If all you can come up with is $40 per month for a "misc. fund", start there. Maybe in a couple months you'll feel ok with upping it to $75, etc. Just don't give up on budgeting- it is vital!

Good luck!