Setting Up Your First Budget? Don't Forget These 4 Expenses
by Maurie Backman | Updated July 25, 2021 - First published on April 7, 2021
Here are some key items to think about if you're creating a new budget.
Congratulations -- you've decided to set up a budget and take control of your spending. You probably know that, to create a budget, you'll need to list your recurring expenses and compare your total spending to your earnings. Here are a few important line items you can't forget to include.
1. Commuting costs
At this point, a lot of us are so used to working from home that shelling out for a train pass or parking spot may not even cross our minds. While many employers are keeping workers remote in the near term, at some point, you may return to the office -- and chances are, it'll cost you some money to get there. Be sure to account for commuting expenses so they don't mess up your budget when they apply again. The good news is that if you make room in your budget for commuting expenses and you don't have to go back to an office for a while, you'll save a little extra during that time.
2. Quarterly property taxes
If you own a home, you may be no stranger to property taxes. But since those -- often, quite substantial -- taxes are usually paid quarterly, it's easy to forget them when you set up your budget.
3. Annual subscriptions or licenses
Maybe there's a music streaming service you pay for once a year. Or maybe your job requires you to renew a certification on your own dime. Those once-a-year costs can sneak up on you, so don't forget to put them into your budget.
Savings aren't technically an expense -- but there should be a line item for savings in your budget nonetheless. If you don't carve out money specifically for savings, you might fail to bank extra money month after month.
The best way to set up a budget
People often rely on memory to list their spending categories. A better bet? Review your bank and credit card statements from the past year. If you go back a full 12 months, you're more likely to spot expenses that don't pop up every month.
Furthermore, don't just guess what your bills cost you -- dig up specific numbers. For example, you might think you usually spend $500 a month at the supermarket, but if you look through a year's worth of statements, you may find that your monthly average is closer to $600. That makes a difference, especially over the course of a year, which is why working with specific numbers is so important. The more accurate your budget is, the more useful it will be in managing your money and meeting the financial goals you set for yourself.
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