When planning to build your budget, it’s great to start with the big fixed expenses first and determine what is a “need” vs. a “want”. If you’re feeling like there is more month than money, it may be because you have factored in those wants over needs or forgotten some unexpected but recurring expenses which can create holes in your budget. This is where having a well planned budget can ensure you end the month in the green and actually plan for those expenses that are very often overlooked. Because let’s face it, we’ve all had expenses pop up that we totally forgot about. If you don’t have these expenses appropriately budgeted for, you can find yourself paying for these on your credit card or pulling money from your savings account and depleting your savings goals. Having a solid budget can ensure you meet all your financial commitments and reduce holes which can create financial imbalance.

Setting Up Your Budget

Holes can easily creep into your budget when you don’t capture all of your recurring expenses. This can happen when you try to create your budget from “your head” or you only capture the last few months of expenses. To avoid this trap, start by going back at least 6 months and pulling ALL of your chequing and credit card statements to get a solid understanding of where your money has been distributed. One year is optimal, but 6 months works great. Now this may seem like work, which it is, but you’ll have to put the work in if you want those great results. Working out for one month won’t get you those 6-pack abs and neither will your financial health be built by looking at only one month of expenditures. The reason why you want to go back at least 6 months is because some expenses don’t occur monthly which will throw your numbers off. Some charges are annual, semi-annual, and quarterly. You’ve built up spending habits for multiple years therefore, getting the 6 months – 1 year average will be best to see how your spending really flows.

That’s Where It Goes

Now let’s get into those holes which most people overlook and forget to capture in their budget. Most people either forget to or don’t even bother to add in the smaller recurring items. Although these may seem small they add up. Just a $20 monthly subscription can amount to $240 per year. This is still money coming out of your pocket and it must be accounted for.

Here are a few “wants/needs” which may spring up on you as a surprise and impact your budget:

Travel - Most people easily forget to include travel and entertainment in their budget. Whether it’s the well deserved beach vacation or that weekend getaway with the girls. Taking time away to rest and recharge is a need in life but we must ensure our budget appropriately captures this. How many trips do you plan to take this year? How much will they cost? Most people hardly ever have the money saved up for these well intentioned trips and end up putting the trip and all the necessary expenses on their credit cards and then come home to headache of debt. Avoid this debt trap by capturing your travel plans in your budget.

Banking fees – This is one area often overlooked in budgeting. Some banks charge per use, others offer a monthly service fee. Some institutions waive the fee as long as you have a minimum amount in your account and of course, some have no monthly fees (these are the ones I recommend and use myself). They may seem insignificant but they can add up and they definitely impact your budget. And also to note in this category is your credit card interest. If your goal is to pay off that debt make sure you are paying off MORE than just the interest every month. Also be conscious of NSF or overdraft fees. These can add up real fast.

Subscriptions – Many of us have subscriptions for software packages or online services - who doesn’t have Netflix and no one can live without Amazon Prime (well I know I can’t). Remember that deal they offered if you paid for a whole year at once? At renewal time, they may charge you for another year unless you cancel. Some services will wheel you in with low subscription fees so it seems negligible and innocent at purchase time but these can greatly add up over time and they surely can throw your budget out of balance if they are not captured.

Memberships – From the gym, club dues, and the winery membership. Most may be monthly, but some are annual, quarterly or semi-annually. If you’re not using it, remove it.

Gifts & Birthdays – How often do you plan for the year long gift giving? Birthday gifts & the parties that go with them, anniversary gifts, gifts for the Teachers, gifts for your pets and of course the ultimate – Christmas gifts. These gifts have a price tag and if you’re skipping out on including these in your budget, expect to end the year with a great big gift of debt!

Annual or Seasonal Expenses – Not all of our expenses are monthly. Take for instance, car maintenance, certain utility bills, subscriptions and summer camps for the kids. Be financially proactive by planning for these in advance. Capture these in your budget by setting money aside each month so that the money is there when these expenses arise.

Charitable donations – Many charities now offer automatic contributions to make it more convenient for you and as a result, the contributions can be easily missed when structuring your budget. If you donate on an annual basis, make sure you capture this annual spend in your budget. A lot of people donate more during the holidays so be sure to have this captured. If not, you may find yourself going into debt in order to support your favourite cause.

Limited time only – Act now because this free trial ends soon! But first, we require your payment information to utilize this trial. These promotions and offers may start free, but won’t be free forever. How free is that? Make sure you capture these expenses in your budget once the free trial is over or if the amount increases after a certain number of months.

Automatic savings deposits – These MUST be set up and captured in your budget. Here’s the truth - it’s not that we don’t have enough money to save. It’s that we wait until all of our wants and indulgences are taken care of, then we see what’s left at the end of the month to figure out whether we can save or not. Creating great financial habits starts with creating a great savings plan. Set up your savings and investment deposits to automatically go out of your account the day your pay cheque hits your account. Be sure to capture these automatic savings within your budget so that you have a clear picture of where every drop of your money is going. Saving for your future, is always a great move - just remember to be conscious of your contribution amounts so you’re not leaving yourself too strapped.

The Roller Coaster

When making the initial commitment to stick to your budget, there’s excitement but there can also be fast discouragement if you don’t stick to it one month. Don’t be discouraged. Life is a journey and as things change around you, you have to be able to adapt. When you get on a roller coaster and it starts to move, to remain safe, you don’t jump off. That may lead to your demise. Instead, you hold on tight and go for the ride. The same goes for your budget. Be committed to achieving success in this area. Create your plan, work it and tweak it if necessary. The hardest part of this journey is starting and you just did that. Keep going - you can do this!