I Forgot About This 1 Expense, and It Threw Off My Whole 2020 Budget

Here's how I dropped the ball in a very sorry way.

There's a reason you should make the effort to follow a budget. As a homeowner and parent, I have many, many bills to keep track of, and a budget helps me stay organized and know where my money is supposed to go each month. I also have a number of savings goals -- to sock away funds for retirement, save enough for big vacations, and more. Having a budget makes my money easier to manage, and as someone whose income is variable, that's important.

But last year, I made one giant mistake when setting up my budget, and it really threw my finances off course.

The importance of accounting for every expense

We all have bills that recur every month, like rent or mortgage payments, car payments, groceries, and so forth. But then there are also bills we don't pay every month. My husband, for example, renews a professional license once a year. Similarly, we have certain services, like a warehouse club membership, that renew annually. We need to account for those expenses in our monthly budget, even though we don't pay them every month.

Normally, I make a point of going through my bank account and credit card statements to identify all of those non-recurring expenses and ensure I don't forget about them. But last year, I somehow skipped over a big one -- auto insurance.

As a two-car household in an expensive part of the country, our annual auto insurance bill costs close to $2,400. Normally, we'd set aside $200 a month to pay it. But last year, I forgot to account for that expense. When that bill arrived in the middle of the year, I was surprised, annoyed, and, frankly, stressed out.

Now to be clear, I didn't have to worry about how I was going to pay it. I have a healthy emergency fund for situations like this (though really, that money is supposed to be used for unplanned bills, and this one should've been planned for). I also have the ability to take on extra work and boost my earnings when surprise expenses pop up. But it was still a frustrating situation to land in, because from that point onward, I felt compelled to cut back on discretionary spending to come up with that money. Granted, it was in the middle of a pandemic, so I was cutting back already, but it was still a mistake I found myself bemoaning for days.

Make sure your budget includes all your expenses

That said, it was also an innocent mistake. I really did look through my bank and credit card statements to pull out those non-recurring expenses and somehow must've just missed this one. But the lesson here is that if you're going to set up a budget, try to make sure it includes all the bills you'll end up paying. In my case, I forgot a large expense. I then had to make up for it by working extra and ordering less food from restaurants (which has been my one indulgence during the pandemic). But not everyone can make up for a forgotten expense that easily, and the last thing you want to do is land in debt due to carelessness.

For this year's budget, I have $200 a month set aside for auto insurance from the start. That $200 goes into a special account I use to pay for my non-recurring bills. The good news is I've already taken steps to fix the problem I encountered last year and get my budget on track. Let's just hope there aren't other forgotten expenses that will sneak up on me in 2021.