To achieve lasting financial freedom, you want your budget to be as strong as possible. However, there are a few important things that might be missing from your budget. It’s crucial to identify these missing items and include then in your budget appropriately. This will help make your budget as strong and as accurate as possible.
Items that are missing from your budget can appear as unexpected costs but in reality, they’re just costs that were overlooked. These costs can leave you scratching your head wondering why you’ve gone over budget again. As a result, your motivation suffers and it becomes easy to give up on your budget and your dreams of financial freedom.
- 1. Annual & quarterly bills
- 2. Health & medical expenses
- 3. Net worth
- 4. Retirement accounts & contributions
- 5. Small automated subscriptions
- 6. Ongoing beauty expenses
- 7. Entertainment costs
- 8. Account buffer
- 9. Gifts
- 10. Cash & multiple bank accounts
- 11. Car maintenance expenses
- 12. Home maintenance expenses
- 13. Membership fees
1. Annual & quarterly bills
Chances are, you have some bills that are due quarterly or annually (for example, utility or car registration bills) instead of monthly. Because these bills aren’t paid often, it’s easy for them to be overlooked in your budget and slip through the cracks.
It probably wouldn’t be such a big deal if it was only a few dollars. However, these less frequent bills can often be really large. If you haven’t planned and budgeted for them, you’ll be forced to dip into your savings or use a credit card to cover them. Large expenses that are missing from your budget can easily erode your wealth and push you into debt.
The best way to plan for larger, infrequent expenses is by creating a saving fund (also known as a sinking fund) for these expenses. You’re basically just setting aside a little bit of money every month to pay the large bill when it’s due.
For example, if you have a $1,200 annual bill, you can plan ahead by setting aside $120 from your budget every month to save up for the bill. When the bill is due, you can pay it off without having to use a credit card or dip into savings that were dedicated to another purpose.
2. Health & medical expenses
Your health and medical expenses are more than just your insurance premiums and regular prescriptions. Since you don’t plan when you get sick, it’s important to always have an allowance in your budget for unexpected medical expenses.
You should definitely have money saved for emergency medical situations in your emergency fund. However, most of the time when you get sick, it isn’t an emergency. For example, if you have a common cold, you’re not going to be dipping into your emergency fund (or at least you shouldn’t be!). Instead, you’re probably going to purchase over the counter cold and flu medicine from the pharmacy. Expenses like this are often missing from your budget.
Now, of course, you probably aren’t getting sick every month, so you won’t always have an expense. However, even if your sickness isn’t an emergency, it is usually unexpected. And as a result, it isn’t considered in your budget.
You can either keep a small fund set aside for non-emergency medical expenses or add it as a separate budget category in your budget. I budget for $200 of medical expenses every month. About $180 of that budget is for my regular prescriptions, but the rest is for any other health and medical expenses that might pop up.
3. Net worth
One of the most commonly missed items in most budgets is net worth. Your net worth is an indicator of your wealth. It’s how much you own versus how much you owe. In order to achieve lasting financial freedom and independence, you need to build your wealth. But in order to really build your wealth, you need to track your net worth and intentionally try to increase it.
By including your net worth in your overall budget, you’re keeping it top of mind and track how it moves every month. You’ll be able to see how your savings increase your net worth and how debt decreases it.
Awareness of how your choices impact your overall wealth will allow you to make decisions that align more closely with your financial goals. However, if you’re not tracking your net worth, you’ll have no idea if you’re actually building any wealth or not. As a result, it’ll be harder to adjust your budget to align with your financial goals.
4. Retirement accounts & contributions
Retirement accounts and contributions are easily overlooked in most budgets. It’s hard to think of your retirement accounts as your money because you probably won’t see that money for decades. But your retirement fund is 100% your money.
By tracking your retirement accounts, you’ll be better placed to decide whether you want to make additional contributions. Furthermore, your retirement fund is a huge part of your net worth and overall wealth. Movements in your retirement fund will directly impact your wealth.
As a result, it’s important to understand your retirement accounts and consider them in your budget and your overall financial plan.
5. Small automated subscriptions
Think of things like small in-app purchases and subscriptions like iCloud storage. These are often small expenses but they add up over time. They might also be the reason why your budget is always off by a few dollars.
A few dollars of overlooked expenses might not seem like a huge deal but small amounts add up quickly. They should be included in your budget, however, you don’t need to add these amounts as separate budget categories. Just add them up and include them in one category to simplify your budget.
6. Ongoing beauty expenses
Since beauty expenses such as products and salon appointments aren’t part of your regular groceries, they’re easy to overlook. We often don’t think about the cost of beauty products and appointments until the expense pops up. For example, your foundation bottle is empty or you need a new bottle of cleanser. Maybe you’re due for a haircut or getting your colour done at the salon.
Even though our beauty routines are a regular part of our lives, it’s not always a regular part of our budgets. I’m not perfect – I fall into this trap too. Because we don’t have to purchase them that often, we don’t consider beauty expenses in our budgets. As a result, we’re often surprised by expenses that weren’t really unexpected.
To overcome this, I created a beauty fund for myself. I dedicate a few dollars of my budget towards beauty expenses every month. That way, when my cleanser runs out and I need to buy a replacement, I’ve already got the money saved for it. Use the same method to save up for your beauty appointments, especially if they’re not that frequent. It’s a much more proactive approach to budgeting that will save you from the temptation to use your credit card or AfterPay.
7. Entertainment costs
Your entertainment for the next month isn’t always planned, so it’s not always included in your budget. For example, you might make dinner plans with a friend next week. However, you didn’t have this dinner planned when you set your budget.
The more spontaneous you are, the harder it’s going to be to capture these costs in your budget. If you’re like me and you like to have things planned out weeks in advance, it’ll be easier to consider the costs in your budget. But I know that not everyone likes to plan ahead like that.
If this sounds like you, create an allowance in your budget for going out and entertainment costs. That way, these costs are already factored into your budget if you need them.
8. Account buffer
A common but important item missing from your budget is an account buffer. I always recommend giving every dollar a plan, because dollars without a plan are easily overlooked and spent. However, that means all the money in your account is spoken for – either spent or transferred to savings.
If you run into any costs that are higher than budgeted or completely unexpected, you won’t have enough money in your bank account. As a result, you either use a credit card or allow your account to go into overdraft. Either way, you’re increasing your debt so you want to avoid both of those situations.
The best remedy is to keep some money in your account entirely for this purpose. It’s an account buffer or cushion dedicated to protecting you from overdraft. Your account buffer doesn’t have to be enormous. The more detailed and accurate your budget is, the less likely it is that you’ll need to use your buffer. It’s more of an insurance policy that’s nice to have when you need it.
Start by building up an account buffer of a few hundred dollars. You can always increase it over time or transfer any additional money to your savings account.
We know that they’re coming but gifts often slip our minds and are missing from our budgets. It’s one thing to remember Christmas gifts because it’s a big time of year and Christmas shopping is heavily promoted. However, it’s not the only occasion where most of us are exchanging gifts. There’s also birthdays, weddings graduations, anniversaries, Valentine’s Day, Mother’s Day, Father’s Day and sometimes ‘just because’.
If there are any regular gift-giving occasions in your life, add them to your budget calendar. This will help you plan for them in advance instead of scrambling at the last minute and buying something impulsively.
10. Cash & multiple bank accounts
These days, most people have more than one bank account and sometimes a little bit of cash sitting around somewhere. It’s easy to forget about bank accounts that aren’t really being used. As a result, all that extra money is missing from your budget and overall financial plan. If that sounds like you, review all your bank accounts and close any that you don’t really need. Chances are that you have some money sitting in unused bank accounts, so it’s time to go rescue it!
11. Car maintenance expenses
Many people don’t think about car maintenance expenses until the need to service their cars or make some repairs. Therefore, these costs can easily be missed in your budget. Your vehicle will probably need regular servicing in order to keep it running safely for as long as possible. As such, car maintenance should be a regular part of your budget.
It’s probably not an expense you’ll incur every month but you can plan ahead by saving money for it in every budget. Create a car maintenance fund based on how much it costs to maintain your car. Look over your past bank statements to help you figure out how much that actually is. When you need to use money from your car maintenance fund, just replenish it in your next budget.
12. Home maintenance expenses
The same applies to home maintenance expenses. You should always have an emergency fund set aside for big expenses like broken pipes etc. However, not all maintenance is going to be an emergency. For example, replacing the batteries in the smoke alarms or having the carpet shampooed are regular activities that aren’t emergencies. As a result, they should be included in a home maintenance fund that you replenish regularly.
Your home maintenance fund doesn’t have to be only for cleaning or maintenance. You can also save up for other household expenses like upgrading appliances, buying new pots and pans and seasonal decorations.
13. Membership fees
Membership fees (for example, gym memberships) are often paid annually. This means that they’re missing from your budget and you’re probably not thinking about them until you receive a renewal notice. Unless you want to cancel these membership services, you need to plan ahead to pay for them.
Memberships can often be expensive and if you’re not prepared, it can be a huge hit to your budget. Just like with your annual bills, set up a saving or sinking fund for your memberships. Set aside some money from each of your monthly budgets to pay for your fees when they’re due.
Your budget is only as strong as what goes into it. Review your budget for commonly missed items to help make it as strong as possible. These can range from large, infrequent bills to small automated transactions. The more accurate your budget is, the more likely you are to be able to stick to it. A budget that’s riddled with overlooked costs can easily destroy your motivation.