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Budget Denial

Does this sound familiar? You've finally gotten fed up with searching the car floor and digging through the couch cushions for subway fare or lunch money at the end of the month, afraid that another $20 withdrawal from the automatic teller will mean an overdraft. Or maybe you're just tired of that nagging and slightly guilty feeling that you could be saving a lot more money.

So, calculator in hand, you sit down to write a budget. After subtracting all your major living expenses, you resolve to make your own lunch and visit the library more often. But somehow, even when sticking to the budget, money seems to go missing every month. It's almost enough to make a person give up on the whole idea of budgeting and dive back under the couch cushions. But it's probably more productive, instead, to find the leaks.

Something always seems to slip through even the best budgeting net. Either we forget small expenses or we forget major categories. Here are some places your money may be going when it disappears like the socks in the dryer.

Transportation. It's easy to budget for the monthly costs of owning a car, like fuel and loan payments. It's the occasional expenses that throw the budget for a loop. When it comes to vehicles, this category can be huge. It might include regular maintenance like oil changes and tire rotations. More expensively, it might include unplanned repairs or new tires.

Then there are costs like driver's licenses, registration, and inspections, not to mention tolls and parking meters. No one item may cost a lot of money, but together they add up. Throw in the occasional parking ticket, and this budget category could be completely busted every month. This is one place to go back to your records and add up your annual expenses to get a more accurate view of your spending. Alternatively, you might choose to add extra money to this category to give yourself a little cushion for those unplanned expenses.

Subscriptions. Anything you pay only once a year has a tendency to get lost in the budget shuffle. Accumulate enough of those annual items, and you've probably got a large budget leak that could be easily identified.

Although it may not cost much to have copies of Cigar Aficionado or Martha Stewart Living delivered to your house, the overall cost of subscriptions can add up if you read several magazines and newspapers. Don't forget your annual computer costs, like software upgrades. Other annual memberships, like those for AAA, Costco, or your bacon-of-the-month club, probably weren't figured into your budget calculations. This list might also include professional dues or association memberships.

Gifts. Let's ignore the holidays for the moment. If you're exceeding your budget in November and December, you probably know why. But, even if you've gotten into serious budgeting mode and remembered to account for your holiday spending, you might have forgotten other gifts. Expand this budget category if you're a year-round gift giver.

There's no shortage of opportunities to lavish your friends and family at all times of the year, from birthdays to housewarming parties. This can be a particularly big budget category for people in large families, with their endless parade of weddings, baby showers, and graduation ceremonies. Then, there are the few dollars here or there collected at the office for someone's retirement or departure party. Add greeting cards to this category if you're a devoted card mailer.

Travel. Like holiday gifts, anyone working at a budget might have the foresight to include vacation expenses. It's the less exciting travel or local trips that tend to be forgotten. This might include weekend trips to the beach or camping excursions. Obligatory trips to see family in far-off states might be omitted when you're daydreaming about how to spend your vacation savings. If you tend to be the type to wander away from home often, add money to your vacation fund for this kind of travel.

Personal Care. Let's start this list with dry cleaning, a budget category that can seem small when you only drop a few things off at a time, but that can grow very big over time. Try to track your spending over three months to get a more realistic view of your average dry cleaning costs. Add alteration costs if, like me, you've rarely encountered a pair of pants that wouldn't need at least two inches cut from the bottom.

The personal care category also seems to suffer from budgetary self-deception. It's fine to tell yourself you'll forgo the eyebrow wax and manicure this month, but it will not keep your spending down if you don't keep the promise. A new lipstick here and a few fancy soaps there, and this budget category can get bigger than you think.

Fees. This can add up to a sizable budget hole if you're incurring late charges, overdraft charges, ATM fees, and any of the other million fees that banks charge these days. If you know you're a little careless with your spending, it might be worth your time to budget for these fees. The idea of budgeting for these bank charges and tracking your spending in this area might even prompt you to do more to avoid them.

Cash. We pay for more and more of our daily needs with credit and debit cards, yet it's cash that seems to slip through our fingertips without notice. How many times have you looked in your wallet on a Friday and wondered what happened to the $60 you had there on Monday? Keep receipts for all your cash spending for a couple weeks and see if that solves the mystery. If not, keep a daily record of your cash expenses for a while to find the missing money.

Keeping these tips in mind will help you budget better. You may still have some hiccups in your budget here and there, but, hey, you can always budget for those, too.

Related Foolishness:

Fool contributor Mary Dalrymple looked for her budget under the couch cushions but couldn't find it. She welcomes your feedback. The Motley Fool has a full disclosure policy.


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